Will There be a 2022 Housing Market Bust or Crash?
Will there be a 2022 housing market bust or crash???
Fear is running rampant about the housing market, right now. From Chicken Little and “The Sky is Falling”, to so called real estate professionals preaching the impending foreclosure landslide.
Seems, everyone’s got an opinion on the housing market and most are NOT guided by facts, historical data or even common sense!
Let’s take a look at the facts and see if we can interpret it better than the fearmongers in the media and on YouTube…
Fact or Fiction?
One way to tell fact from fiction is to look at the data.
Yes, I am a Real Estate Agent so it’s natural for me to stay up to date and in the know as much as possible when it comes to the national, state and local real estate market, so I can educate and guide my clients.
Most people have, will or plan to buy a home at some point, right?
This information is definitely a useful tool and one to use to help you decide what your next step is when in or entering the real estate market as a buyer or seller.
Keep in mind, fear causes people to make irrational and emotional mistakes. In this case, fear is caused by confusion, “The sky is falling” mantras and the media/social media making things look worse than they are.
You can’t ONLY look at one or two stats and expect to get a clear picture of what’s happening in the housing market.
You have to step back and take in the view with a bit of perspective in order to really understand and realize this is not 2006-2011 again.
Earlier this year, I wrote an article about the forecast for the 2022 Housing market. I just read back through it. Pretty much on course with the forecast, I’d say…
Data Tells A Story
So what is the data telling us about Foreclosures?
The data is telling us that the historic low inventory of homes for sale is still, well, historically low. However it is inching its way up, little by little.
As of July, the USA was 3.8 million homes short of meeting housing needs. It would take that many homes suddenly hitting the market to equal the supply-demand metric.
Will we get a flood of foreclosures?
Another historic low data point is foreclosures. Some people predicted that when the Pandemic induced moratorium on foreclosures was lifted, the housing market was gonna be flooded with foreclosures. Didn’t happen. Why?
Because homeowners are in the best position they have been in – almost ever! The collective national amount of equity reached all time highs to $27.8 Trillion. Almost half of all homeowners have at least 50% equity in their home!
According to the report from ATTOM, the share of homes that were considered seriously underwater fell to 2.9% in Q2 of 2022.
Additionally, Rick Sharga of ATTOM Data stated “Repossessions are likely to continue running below pre-pandemic levels for several reasons, most importantly that over 90 percent of borrowers in foreclosure have positive equity in their homes, and would benefit from selling these properties at a profit rather than risk losing everything to a foreclosure auction or lender repossession.”
Below are some interesting stats:
The Housing Bubble crash in 2007 was mostly caused by loosey-goosey lending habits by banks and mortgage companies (basically giving mortgages to anyone, regardless of their ability to pay it back. And, the majority of them were adjustable rate mortgages, at that time.)
In the graph, it shows no direct correlation between mortgage rates and home prices. This is why we don’t see the rates rising right now, having a huge impact by bringing prices down.
Outside the circled time period on the graph, home prices don’t really go down. They simply slow their ascent upward….
If you look at the 1980’s when interest rates where at their highest point in tracked history, home prices were still moving up.
From the 70’s through today, interest rates have been all over the board with the average coming in at 7.76%.
Today, we are at 5.89%, almost 2 points below the approximate 50 year average.
Homes have always sold, regardless of interest rate because people still have life events that happen to them that require a move. Even when interest rates were 18%, homes sold.
The interest rate alone should never dictate whether you move or not. It’s very personal and should depend on your situation – financially, lifestyle-wise and life event-wise. The need is always there, no matter what the interest rates.
Timing the market is next to impossible and should not be your motivation.
The best answer to whether you should buy or sell your home is – it depends on your particular situation.
And, looking at the graph above, to the left, it seems home prices are usually the cheapest today because history shows they continue to rise…
As Robert Dietz, chief economist at the National Association of Home Builders says, “I don’t think buyers should be betting on any really significant price declines. If anything, as interest rates move higher, the cost of buying a home is going to go up.”
And, he is not alone in that analysis. Most experts say that price appreciation will stabilize closer to what the average normal appreciation is at between 3% and 5% per year.
However, that is STILL appreciation, not a drop.
It is possible that local markets like Phoenix, AZ and some markets in Idaho, California or Colorado, for example, may see a drop in price because of the unbelievable appreciation they’ve experienced recently.
Remember, Real Estate is a hyper-local industry. What’s happening in our neck of the woods is very different.
The market is adjusting – trying to move back to what is considered normal. If you are waiting for a large price decrease – you are probably waiting in vain and will pay more with each passing day.
That’s what the data is telling us. What are your thoughts?
