At this stage, it’s difficult to avoid hearing that the housing market is about to collapse. Oh wait, the next news story says there’s a good possibility it won’t happen in 2022. The fact is that no one knows what will happen next in the housing market. We can only try our best to look for indications.
A crash or a popping bubble?
Many people think we are presently in the midst of a real estate bubble. The following is how a real estate bubble is defined:
- There is more demand for houses than there is available. (Check.)
- There is a stunning rise in property prices. (Check.)
- Large numbers of investors flood the market, hoping to flip properties and make a quick buck. (Check.)
- Buyers are ready to waive conditions designed to safeguard their financial interests, such as home inspections and appraisals. (Check.)
Home sellers presently have the upper hand in most areas, as opposed to buyers. However, if you detect three of the following four phenomena happening on a regular basis, it’s reasonable to believe that a housing downturn will soon follow.
1. Home prices soften
The value of your home will vary depending on the region. That being said, there are numerous indications that some price softening is taking place in select areas. In Peoria, Illinois, for example, property values have fallen by 1.8 percent, while they’ve decreased by almost 5 percent in Gulfport, Mississippi. Beaumont has experienced a decrease of around 1.4 percent overall, whereas prices in Kansas City have dropped by 0.7 percent.
It’s not much yet, but it’s something to keep an eye on.
2. Confidence declines
According to a Fannie Mae poll from February, 70% of people believe now is a poor time to purchase a home. This conclusion stems from some fundamental logic. Only 43% of respondents believe house prices will rise in the next year, while 58 percent expect mortgage rates to rise. Furthermore, 17% of those polled stated that they are concerned about losing their jobs. Individuals who are worried about the future are less likely than others to participate in a bidding battle over a property.
3. Rise in interest rates
Mortgage rates have recently reached 4%. While 4% is still modest, rates are gradually climbing. To return to the idea of supply and demand, when high costs combined with higher interest rates reach a plateau that causes people to withdraw from the market, lowering property values.
With so many specialists predicting when the housing bubble will burst, the old adage “even a blind squirrel finds a nut once in a while” seems appropriate. After all, some of them are sure to be correct by sheer chance.