Mortgages rates and housing inventory continue to be near record lows. In many parts of the country, housing prices continue to break records each month. Predictions range from the housing market is in a dangerous bubble to a market that is slowing down. Read on to find out if the housing market is on the road to continue booming or is it set to crash.
The Current Housing Market
Currently, home inventory is rising but nowhere near enough to satisfy the demand. Mortgage rates have been at historically low levels the past year or so. But we have had periods of hot real estate markets in the past at higher mortgage rates.
The main problem is the lack of available homes for sale. Even though it is a seller’s market, many have decided to stay in their current home. One reason is that they fear if they sell their home now, it will be hard for them to find another home.
Another reason for the low inventory is home builders were slow to pick up the pace after the mortgage crises of 2008 – 2010. Even though they have started building new homes at a much quicker pace, soaring material prices due to shortages are causing new home prices to increase along with the increasing sale prices of older homes.
Predictions for the US Housing Market
There are some predictions that the housing market is in a bubble and will crash in 2021, even though no one really knows if it is a bubble until it pops. There is not much of a basis for a crash other than rapidly rising mortgage rates coupled with high unemployment. But very few economists see that on the horizon.
With the Great Recession still fresh in our memories, there is still a concern that could happen again. But the mortgage crises that caused millions of Americans to lose their home to foreclosure were mainly brought on by over-speculation and loose lending practices. Today, lending practices and income requirements are much stricter.
Most predict a slowing housing market as mortgage rates slowly increase while still remaining low. The record price increases that we’ve been seeing are probably going to end. Economists at the National Association of Realtors predict that prices will continue to rise through 2021, but not at the pace we have seen.
In cities like Denver, Phoenix, and Boise, where price increases have been dramatic, price increases are already showing signs of slowing. The pandemic has also caused a shift in the workforce, with more employees working remotely from their homes.
The shift to remote working has allowed potential homebuyers to move to more rural areas like Estes Park, Colorado, where real estate companies in Estes Park have been busy showing mountain homes and property.
Most economists predict that home price increases would slow down as we head into next year. In 2021, we saw an average increase of 24%, and by 2022, home price increases should moderate to 5.3%. There should not be a housing market crash like we experienced in the mortgage crisis of 2007 through 2010.