To the frustration of potential homebuyers, property prices continue to soar, with little sign of a slowdown, despite some of the highest mortgage rates in two decades. So, is a housing market crash on the horizon? Here’s what the experts are saying, according to Bankrate.
Market Trends
The U.S. housing market seemed to be heading for a correction in late 2022, but instead of falling, home prices started climbing again. The National Association of Realtors (NAR) reports that in June 2024, the median existing-home price reached a new all-time high of $426,900, up 4.1% from the previous year. This marks the 12th consecutive month of price increases. The S&P CoreLogic Case-Shiller index also hit a record, rising 5.9% from the previous year.
Supply and Demand
The persistent rise in home prices can be attributed to a classic supply-and-demand imbalance. Although inventory levels have been growing, they remain tight, with NAR data showing a 4.1-month supply of homes. Even with mortgage rates peaking at 8% in October 2023, home values remained stable, highlighting the market’s resilience. Rates have since decreased, averaging around 6.6% in early August 2024.
Expert Opinions
Experts are generally optimistic about the market’s stability. Lawrence Yun, NAR Chief Economist, predicts that home prices will stay firm nationwide, citing insufficient inventory as a key factor. Similarly, Greg McBride, Chief Financial Analyst for Bankrate, emphasizes that high demand and limited supply are driving prices up.
Rick Arvielo, head of New American Funding, and Skylar Olsen, Chief Economist at Zillow, agree that prices are likely to keep rising due to the ongoing supply shortage. Arvielo notes that inventory constraints will prevent significant price drops, while Olsen expects prices to climb through the year.
Potential for a Crash?
Most analysts do not foresee a dramatic market crash. Mark Fleming, Chief Economist at First American Financial, argues that the fundamental issue is the shortage of housing, which prevents substantial price declines. Dave Liniger, founder of RE/MAX, warns that if mortgage rates fall significantly, increased buyer activity could drive prices even higher, leading to a new cycle of boom and bust.
While some markets, like Austin, Texas, have experienced slight price declines, a national crash remains unlikely. The housing market is supported by strong demand and a shortage of inventory, which diminishes the chances of a severe downturn.
Current Statistics
- As of August 7, the average mortgage rate for a 30-year loan was 6.59%.
- Existing-home sales dropped by 5.4% from May to June and from June 2023 to June 2024.
- The nationwide median sale price in June was $426,900, setting a new high.
- Inventory levels stood at a 4.1-month supply in June, still below the 5 to 6 months needed for a balanced market.
- Foreclosure filings fell 22.7% year-over-year, with Illinois having the highest rate.
In summary, while some areas may see localized price declines, the overall housing market is expected to remain stable due to ongoing supply issues and strong buyer demand.
