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Will the housing market crash in 2022? After all, doesn’t the current housing climate look similar to the market right before the crash in 2008? It is easy to get a mortgage right now and home values are going up after all!
The good news is that while there may be some similarities to 2008, today’s market isn’t the same. Most experts are not predicting a crash this year. Let’s look at a few facts to explain why.
No Housing Market Crash in 2022 Due to Inflation
We’ve all noticed the rising prices. Everything from food at your local restaurant to building materials at hardware stores to gasoline is getting more expensive. The biggest problem is we don’t know when this inflation will end -the cascading effects of things like building materials and paper used to produce boxes is going to have a trickle down effect on the prices of everything else for a while.
According to a report from the Bureau of Labor Statistics, the inflation rate was 7%, among the highest we’ve seen since 1982! While that’s not encouraging, it can actually be good news for the housing market. To combat inflation, the government will likely raise interest rates. Knowing this, home-buyers would do well to get into homes now while the rates are still relatively low. It’s not just people who plan on living in the home they want to buy. Investors are still scooping up homes while the interest rates are low. Low rates = lower payments = more money goes into their pocket from tenants every month. And just in case you’re wondering, here’s a website with today’s mortgage rates.
No 2022 Housing Crash Thanks to Millennials
We’ve been hearing a lot about Millennials for a while now. Besides the fact that this is the largest generation in terms of population, it’s also an important group due to their life stage. The youngest Millennials are 25 years old and the oldest are 41. This means they’ve all been in the workforce for at least a few years, and some have been at it for almost 2 decades. They’ve been renting for a while and saving up, and now they’re out to buy a home. It doesn’t matter that a starting home is much more expensive now than it was a few years ago. They still want a home! Since a lot of them are now able to work from home, they’re moving out of big cities into the suburbs where homes are less expensive.
Small Inventory = No Housing Market Crash in 2022
One thing that led to the 2008 crash was people were easily getting mortgages they couldn’t afford. That’s not what’s happening right now. Yes, demand is high. Yes, home prices are going up and it’s common for the best homes to be sold way over asking price. But unlike 2008, there aren’t tons of people borrowing more than they can afford. There’s a housing shortage. Supply is much lower than demand right now. Demand is high because of what we just talked about -low rates and Millennial’s looking to buy homes. Meanwhile some homeowners who may be interested in selling are reluctant to do so. They’ve heard stories about the hassles of buying a home right now and are “waiting it out.”This is a good thing for the housing market, because it means people are able to keep paying their bills. As long as that happens, banks won’t go under and the market won’t crash. Building materials are getting more expensive by the day. This makes it harder for builders to throw up new homes, so the supply shortage is going to be around for a while.
Just because there won’t be a crash doesn’t mean prices won’t keep going up. While it’s not expected to be like 2021, most industry experts do expect home values to continue to climb. If you’re thinking about buying, do it sooner rather than later! We always recommend you go ahead and get pre-approved for a mortgage. Send us an email at [email protected] and we’ll get the process started for you.