Will the Housing Market Crash? What Experts Predict for 2024

Key Insights:

Home prices continue to hit record highs, while mortgage rates remain elevated after a brief decline.
Experts predict any market correction will be mild, far from the dramatic downturn of the Great Recession.
Low housing inventory, strict lending standards, and strong demand are preventing a market crash.

Despite rising mortgage rates, the housing market remains resilient. Property values keep climbing, and while some hope for a downturn to make homes more affordable, experts suggest that’s unlikely. Here’s what industry professionals are saying about the possibility of a housing market crash.

Home Prices Stay on the Rise

In late 2022, the U.S. housing market began to cool, sparking hopes of a price correction. However, instead of declining, home values rebounded and continue to rise. The S&P CoreLogic Case-Shiller Index reported a 4.2% year-over-year increase in August, marking another record high.

This price resilience comes despite a drop in home sales and persistently low inventory. Many homeowners are holding onto properties with locked-in mortgage rates around 3%, limiting the supply of homes for sale. As a result, experts believe any market correction will be mild, unlike the steep price drops seen during the Great Recession.

Key Housing Market Statistics

Median Sale Price: $404,500 in September 2024 — the highest median price for a September on record, just shy of the all-time high set in June 2024.
Mortgage Rates: The average rate for a 30-year fixed mortgage was 7.0% as of November 6, according to Bankrate.
Inventory Levels: The U.S. had a 4.3-month supply of housing inventory in September, an improvement from last year but still below the 5-6 months needed for a balanced market.
Foreclosures: Foreclosure filings in September 2024 totaled 29,668, down 19% from the previous year, indicating a healthy lending environment.

The Impact of Supply and Demand

The housing market’s strength can be traced to a simple formula: low supply and high demand. Inventory remains tight, with many homeowners opting not to sell due to high mortgage rates. Builders are struggling to keep up with demand due to regulatory hurdles and the challenges of land acquisition, further limiting supply.

Greg McBride, Bankrate’s chief financial analyst, notes, “The fundamental reason for the run-up in price is heightened demand and a lack of supply.”

Will the Housing Market Crash?

Experts agree: A housing market crash is highly unlikely. Today’s market is fundamentally different from the conditions that led to the Great Recession. Key differences include:

Low Inventory: Even with a slight increase, supply remains far below what’s needed to meet demand.
Strict Lending Standards: Unlike the “liar loans” of 2007, today’s borrowers are held to high credit standards, with a median credit score of 772 for new mortgage approvals.
Demographic Trends: Millennials, Hispanics, and other growing demographics are fueling demand for homeownership.
Equity Cushion: Homeowners today have significant equity, minimizing the risk of widespread foreclosures.
Muted Foreclosure Activity: Foreclosure rates remain historically low, with no indication of a surge that would destabilize the market.

Why a Market Correction May Be Modest

While prices might soften in select areas, experts believe the overall market will remain stable. Lawrence Yun, Chief Economist for the National Association of Realtors, emphasizes, “The likelihood of a market crash is minimal.” Most homeowners have strong financial footing, and the demand for housing continues to outpace supply.

What’s Next for the Housing Market?

Although home prices and mortgage rates are challenging for buyers, the fundamentals of supply and demand suggest the market won’t see a dramatic downturn. Greg McBride advises, “Buyers should be cautious not to overextend financially, but sellers will continue to benefit from a competitive market.”

If you’re considering entering the housing market, now is the time to consult an experienced real estate agent. Whether you’re buying or selling, navigating today’s market requires expert guidance to make informed decisions.

Original article: Is The Housing Market Going To Crash? | Bankrate