Podcast - 076: Will home prices fall? Are we heading into a housing market crash?
In this episode, realtor Anthony Luevanos and lender Angel Luevanos explain whether a looming housing market crash is coming. We recommend watching this podcast on youtube so you can see the charts for yourself.
Will a recession mean a housing market crash?
No, a recession does not always lead to a housing market crash. In fact, of the last six recessions we had, only twice did home prices drop!
Here’s the data for home price change:
1980 - 6.1% increase
1981 - 3.5% increase
1991 - 1.9% decrease
2001 - 6.6% increase
2008 - 19.7% decrease
2020 - 6% increase
Are we heading into a buyer’s market?
Some housing market experts like to compare our current market conditions to the 2008 housing crash. But we simply have a much different market. And in Los Angeles County, the market is even tighter, with 1.5 months of supply of existing homes for sale. That means it would just take 1.5 months for all the houses in the market to be sold if there were no more homes listed. We are talking about 5-6 months in a balanced market, so it’s evident we just have way too much demand, given the current supply of homes for sale.
Are we in a housing bubble?
Here’s what we know. Since the 2008 market crash:
- Lending standards have tightened drastically, and borrowers' risk has been cut in half
- The market is currently undersupplied by 5-6 million homes rather than oversupplied
- Most homeowners are more cautious with their equity and have much more of it
- In addition, experts predict home prices to continue to appreciate this year in the face of rising interest rates.
Are we going to see a wave of foreclosures?
We saw less than half the foreclosures in 2020 and 2021 than in any year from 2017 to 2019. And any foreclosures that do hit the market will likely have little impact. Here’s why:
- Most homeowners have enough equity to sell their homes. ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity.
- There are have a lot fewer foreclosures over the past two years.
- The current market will absorb any new listings with the lack of supply.
Will home prices go down?
Across the board, home prices are expected to appreciate. The average of all seven forecasts is 9% appreciation for 2022:
Fannie Mae predicts 10.8%
Freddie Mac predicts 10.4%
CoreLogic predicts 9.6%
Home Price Expectancy Survey predicts 9%
National Associaton of Realtors predicts 8.4%
Zelman predicts 8.3%
Mortgage Bankers Association predicts 6.2%
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