The current housing market landscape consists of home prices consistently climbing, high mortgage interest rates, and an overall cooldown. Everyone is speculating about an impending market crash. But is there actually data to suggest an impending crash? That’s what we’re going to talk about on today’s show!
On this episode of Investing in Real Estate, we’re going to dive into the likelihood of a housing market crash this year. I’m sharing the two main reasons why I don’t believe there’s a crash in the future, and the dangers of trying to time the market. Click play to learn more!
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First, there is an incredible demand for properties. The supply and demand equation will not allow a price crash anytime soon. In fact, we have an affordable housing crisis in the US! But don’t just take it from me. Rick Arvielo, the head of the mortgage firm New American Funding was quoted as saying, “You’re not going to see house prices decline. There’s just not enough inventory.”
And chief economist at Zillow, Skylar Olsen, agrees that we have a massive supply and demand imbalance. Her latest housing market forecast states, “We’re not in that space where things are suddenly going to be more affordable.”
Builders who have been burnt before are hesitant to churn out an excess of inventory, further adding to the lack of supply.
Any market correction that might occur in the coming months would be slight. We’re not likely to see price drops similar to what happened in 2007 and 2008.
Here’s the second reason why a crash isn’t coming: it’s exponentially harder to get a mortgage today than it was 15 years ago. The playing field is totally different. Lenders no longer play fast and loose with mortgages. In fact, it’s pretty hard to qualify. The loose lending qualifications in the early 2000s led to artificial buying power, which contributed to the crash.
Today’s homeowners have great credit, plenty of equity, and mortgage rates locked in at less than 5%. So not only are today’s homeowners financially qualified to own their homes, but they’re also not likely to sell anytime soon, further contributing to the low supply of housing.
So what does all of this mean from an investing standpoint?
If you have the means to buy rental properties, now is a great time. Renting is how many individuals and families are affording to live while prices and rates are high. One of the best ways to help remedy the affordable housing crisis is to buy real estate and act as a fair landlord.
Home prices are going to remain elevated for the foreseeable future. It’s going to take a long time for the market conditions to stabilize in a way that allows prices to drop. Again, it’s simple economics, supply and demand.
Interest rates, however, have likely reached their peak and will eventually begin to drop. And this is where one of my favorite investing mantras comes in: date the rate and marry the property.
If you find a good investment, take action on it, even if the interest rate isn’t optimal. Because when rates inevitably drop, you can always refinance, and you’ll still have a great investment with solid equity.
Waiting around for the perfect conditions to invest isn’t a wise strategy. True investors think through a long-term lens, and they know that it’s more important to have time in the market, rather than trying to time the market.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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