Hey everyone! It’s The Garza Home Team at RE/MAX North San Antonio, back with another blog to help you navigate the ever-changing real estate market. With so much speculation about whether the housing market is headed for a crash, we wanted to share some expert insights and solid data. Housing economists have identified five compelling reasons why a market crash is unlikely. Here’s what you need to know:
1. Inventories Are Still Very Low
Current Inventory Levels
Let’s talk inventory! A balanced housing market typically has a 5- to 6-month supply of homes. According to the National Association of Realtors (NAR), there was just a 3.5-month supply of homes for sale in April. This shortage shows that the demand for homes is far greater than the supply, helping to keep prices up.
Impact on Housing Prices
While a 3.5-month supply is better than the 1.7-month supply we saw in early 2022, it still indicates a shortage. With fewer homes available, buyers are often competing for the same properties, driving prices up and reducing the chances of a price crash.
2. Builders Aren’t Building Quickly Enough
Post-2007 Building Slowdown
Builders have been pretty cautious since the last market crash in 2007 and haven’t returned to those pre-2007 building levels. This cautious approach helps prevent overbuilding, which could lead to a surplus of homes and potential price drops.
Regulatory Hurdles and Land Acquisition Challenges
Plus, there are regulatory hurdles and land acquisition challenges that slow down the building process. This means builders can’t quickly meet the current high demand. Greg McBride, Bankrate’s chief financial analyst, says the issue is high demand and low supply. Even as more homes come to market, it’ll take time to balance supply and demand, preventing any sudden market collapse.
3. Demographic Trends Are Creating New Buyers
Pandemic-Driven Demand
Several demographic trends are driving strong demand for homes. Many homeowners sought larger spaces during the pandemic due to remote work. This shift in lifestyle created a surge in demand that continues to influence the market.
Millennials and Homeownership
Additionally, Millennials, a significant demographic group, are in their prime home-buying years. This large cohort is actively pursuing homeownership, adding to the sustained demand for housing.
Hispanic Homeownership Trends
The Hispanic population is also increasingly pursuing homeownership. This demographic trend further supports market stability as more individuals and families look to buy homes, contributing to the ongoing demand.
4. Lending Standards Remain Strict
Comparison to 2007 Lending Standards
Unlike in 2007, when “liar loans” were prevalent, today’s lending standards are rigorous. Borrowers must document their income, have good credit, and meet strict criteria. This disciplined lending environment reduces the risk of a market crash driven by risky loans.
Current Lending Criteria
The Federal Reserve Bank of New York reported that the median credit score for new mortgage borrowers in the first quarter of 2024 was an impressive 770. High credit standards ensure that borrowers are more likely to be financially stable and capable of maintaining their mortgage payments.
5. Foreclosure Activity is Muted
Homeowner Equity Levels
After the last housing crash, a surge in foreclosures flooded the market and drove prices down. Today, most homeowners have significant equity in their homes, and foreclosure activity remains low. High equity levels mean that homeowners are less likely to default on their mortgages, which helps prevent a flood of foreclosures that could destabilize the market.
Foreclosure Rates Post-Pandemic
During the pandemic, lenders paused filing default notices, resulting in record-low foreclosures in 2020. While foreclosures have increased slightly since then, they remain far below crisis levels. This continued low rate of foreclosures supports market stability.
Despite high home prices testing the limits of affordability, the current market dynamics suggest stability rather than a looming crash. At The Garza Home Team at RE/MAX North San Antonio, we believe in providing transparent and honest advice. If you’re considering buying or selling a home, we’re here to guide you through these complex market conditions with expertise and integrity.
For personalized real estate advice and to stay informed on the latest market trends, contact The Garza Home Team at RE/MAX North San Antonio. Your dream home is closer than you think!
