West Chester realtor Gregg Sutter

Will the Housing Market Crash Again?  

If the last two years haven’t been catastrophic enough, we are starting to see housing market crash worries trending! But is there any real reason to be nervous or is this just a ghostly knee jerk reaction from 2008? Let’s dig into it!  

What would cause a housing market crash?  

Fourteen years ago, we saw the economy take a nosedive. The housing market bubble reached its limit and burst. What makes a bubble in the first place though? A housing bubble starts with high housing demand, with limited availability, like we have right now. Don’t start sweating just yet though! Demand is then further pushed by investors buying houses to fix and flip. Due to all the high demand and low supply, prices naturally rise.  

With all the possibilities that cause demand, from an increase in population to shady home buying practices, housing bubbles are the result. All the factors in this environment just build on one another. Bring extravagant risk-taking behavior into the mix and you’ve got yourself a perfect housing market bubble primed for bursting. Prices will no longer look anything like they are supposed to. Supply continues to increase, while demand suddenly drops. Then prices dramatically lower, but no one is there to buy.   

It’s important to note, housing bubbles are not as prominent as most other asset markets, but they do occur, as we’ve experienced before. Studying long-term averages helps us predict where housing prices are going while we see rapid valuation followed by stagnation or lowering prices. The same result can be seen when values are lower than average.  

So… Are we headed towards a housing market crash?  

While we might be experiencing a potential housing bubble of sorts, not all factors point to a crisis at this time. Let’s go over some of the factors within the housing bubble powder keg to see how we size up:  

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  • Risky Mortgage Prevalence – The first factor and most important that sets us apart from our past mistakes is the playing field. Back in 2008, there was a huge availability of mortgages being handed out to people that just didn’t qualify. Today, most mortgage qualifiers have high-quality credit.  
  • Over Supply of Houses – Today, although we are seeing an increase in housing supply, it is nowhere near a point of oversupply. Right now, our average buyer to house ratio is 15 to 1. That’s pretty crazy!  
  • Economic Rise w/Increased Prosperity – While the economy is slowly rising and we did just have circumstances that helped put more income in consumers’ pockets, it’s shown that it wasn’t exactly disposable, as many had a lot of financial hardships during the pandemic. This one is in the middle.  
  • Low Interest Rates – Though they are low right now, they are predicted to rise as the Feds respond to high inflation. The only thing that will change this would be a resurgence of virus restrictions.  
  • Increase in Buying Population – We are seeing a slight increase (9%) predicted for the next 20 years in the buyer population largely due to new minority homeowners.   
  • Increase in House Flipping – Right now profits from house-flippings are at an all-time high! We haven’t seen this kind of increase for 20 years.  

As you can see, we do meet some requirements for a housing market bubble and potential crash, but all the elements are simply not there that point to imminent danger, thankfully.  

The Bottom Line for A Housing Market Crash

The best thing to keep in mind as you are scanning housing market trends and talks is that a lot of it can be speculative. Do your research and keep to credible sources that you trust. If you are looking into investing in the housing market, whether it be for personal or business matters, keep a keen eye on the market. If you are a long-term investor that is financially ready and qualified, you should not need to worry.  

Ready to buy or sell and need a top-notch realtor’s help? Look no further!  Gregg Sutter is a knowledgeable, hard-working, honest Cincinnati Realtor who is easy to work with yet has an intense desire to succeed. Contact Gregg today!