How housing market operates? Is it on the verge of Collapse?
Do you look forward to invest in buying a house? If Yes, you should stay a little longer to have a complete idea of what to expect and what could happen. Housing Market Crash is characterized by the collapse of Housing Market where the availability and stability of houses gets compromised. The most serious housing market crash was experienced back in 2008. In present, measures are under progress to prevent any further crashes.
In this article, we will delve deeper into what is it, how it works, a sneak peek into history, and whether is housing market again doomed to crash? Let’s take a look!
What is a Housing Market?
A market which offers houses on sale is called a housing market. It comes with different areas of houses, variety in the ambience, accompaniments and much more. There are different agents who are involved in selling these houses. You can meet them up online and can have an on-site visit as well.
In simple words, different property dealers, brokers, residential properties bring about a full fledge housing market in existence.
Factors Holding Up the Housing Market
Increasing Housing Needs
Who doesn’t have a wish to become a homeowner? Yes, everybody has it. This doesn’t seize the housing market to come out with more in trend houses. A strong market demand for house persists because of an increasing population growth, increasing employment, leading to a significant rise in the incomes.
Limited Housing Availability
Given the number of buyers out in the market, houses for sale are never enough. The availability of houses get influenced by a bunch of factors; short supply of building materials and also the hesitation of the homeowners to put up their houses for sale in the market.
Factors Responsible for a Housing Market Crash
Lasting Inflation
Due to prevalent inflation, it is hindering the ability of the population to be able to afford a house. Soaring inflation can contribute to housing market crash.
A Probable Recession
As of 2024, economists have predicted a potential recession in the US economy. It means increase in unemployment which will lead to a subsequent decrease in consumer confidence in terms of buying a home.
Soaring Interest Rates
Federal Reserve has increased the interest rates to tackle the inflation. In return, it will make it impossible to borrow money from a bank as a mortgage. Resulting in a decline of demand for houses.
Lessons Learned from Previous Housing Market Crash, 2008.
Do you still remember the Housing Market Crash which occurred more than a decade ago?
“Housing Market Crash of fall 2008” also known as “The Great Recession” will take you to the same crisis which continued for about 18 months. Let’s learn, how Housing market has developed since 2008?
Housing Market (in 2008) VS Housing Market (in 2024)
| Sr. No. | Housing Market(2008) | Housing Market(2024) |
| Bad Lending Standards:Lending regulations for loans were not strictly monitored. | Improved Lending Standards:Lending regulations for loans are strictly monitored to ensure that loan can be repaid. | |
| Low Interest Rates:Interest rates were fairly maintained at low rates. | Lesser Interest Rates: Proactively, Interest rates are kept low to promote a growth in the housing market. | |
| Buying House – Means of Investment:Buying a house was seen as a means of investment only. | Buying House – Availed for Actual Living:Buyers prefer to live in the purchased houses rather than purchasing a house only for the sake of investment. | |
| Oversupply of Houses:Houses were built out of mere speculation leaving majority of them unsold. | Shortage of Houses:Houses are built as per the demands and requirements, making it difficult to find a house of choice. | |
| No Location Specific Demand:People were not used to consider the location aspect of a house that much. | Conscious Location Preferences:People actively ask for certain locations i.e., Suburban & Rural areas given the flexibility of modern day professional life. |
Facts Indicating No Housing Market Crash Anytime Soon
No More Over Supply of Houses as Before
Houses are not build upon speculations anymore. Because speculations induced building of houses more than they were needed. Resulting in an oversupply of houses.
Currently, houses are tried to be built upon demand and the requirements of the buyers. It keeps the housing market going.
Supply & Demand Equation is not in Equilibrium
A market thrives when the supply and demand are in balance. What say?
For a normal housing market, it has to contain an inventory of at least 5-6 months of supply. Considering the last crisis we’ve just discussed, its hard to achieve even in the present times.
In December 2022, only 3.2 months’ worth of supply of houses was in inventory, via National Association of Realtors.
Location Specific Demands are Bringing in More Buyers
Due to a sudden shift in the mode of work globally, it has also affected the housing market. As more and more people can now avail this opportunity of working from home or anywhere else.
It has made people more conscious of the location choices of the houses. Have you witnessed anything like it?
Lending Standards are not as the Previous Ones
The lending standards have transformed completely since 2008. As of 2007, borrowers didn’t have to mention regarding their income to get any amount sanctioned.
In 2024, that’s not going to be the case as you will have to provide every bit of information to borrow any amount of money.
Foreclosure has come under Control
Due to the housing crash, foreclosure really peaked in the housing market. Furthermore, it lowered down the prices even more at that time. In 2020, the records of foreclosure were the lowest.
Conclusion
Housing Market Crash taught the market a lesson for good. Since the last crash in 2008, it has brought a lot of good improvements in the housing business. Currently, Housing market is thriving and managing to stay afloat and in business. It tries to come up with the interventions which lies in the best of the buyer’s interests to flourish and further expand the market.
This brings us to the end. Kindly, Sound off in the comments what do you think of the current market. Thank you!
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