{"id":143061,"date":"2022-05-13T09:47:34","date_gmt":"2022-05-13T15:47:34","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=143061"},"modified":"2024-01-05T17:28:01","modified_gmt":"2024-01-06T00:28:01","slug":"is-the-housing-market-about-to-collapse","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/is-the-housing-market-about-to-collapse","title":{"rendered":"Is The Housing Market About to Collapse? What Investors Need to Know"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC2336019537&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">It seems like every media outlet, and perhaps every person on Earth, is debating if the housing market is going to crash soon. While the truth is that no one really knows what\u2019s going to happen, we can examine data and attempt to determine what is most likely to happen.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Personally, I don\u2019t believe a market crash (which I define as a price decline of 20% or more) is the most likely scenario as of now. I think the more likely outcome over the coming years is a significant moderation of the housing market, with a chance that prices flatten or even go modestly negative for a period in late 2022 or 2023.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That\u2019s my interpretation of the data. But at the same time, I also recognize there is more risk in the market now than there has been since 2007. Because that risk exists, I think it\u2019s important to examine what would have to happen to market fundamentals for the market to crash. This way, you all can determine what you believe is likely to happen for yourself.&nbsp;<\/span><\/p>\n\n\n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">On the Market Podcast <\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Learn from Dave Meyer and his expert panel about the trends, data, and headlines shifting today\u2019s economy so you can invest and build wealth with confidence.<\/p>\n\n\n\n<div id=button-custom-event-block_654009d806887 class='button-custom-event'>\n      <a href=\"https:\/\/link.chtbl.com\/OTM\" x-on:click=\"window.analytics.track(&#039;OTM Podcast Blog CTA Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/is-the-housing-market-about-to-collapse&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-slate-dark-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Listen Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  shadow-xl rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/On-The-Market-scaled-e1660859845837.jpg\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n\n<p><span data-preserver-spaces=\"true\">When it comes to housing prices (or the price of anything in a free market), everything ultimately comes down to good old supply and demand. Of course, other variables like inventory, inflation, and interest rates, all matter \u2013 but they only matter insofar as they impact supply and demand.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Right now, there is much more demand than there is supply. This has been the dynamic for the last several years and is the reason prices have been skyrocketing.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019re thinking to yourself, \u201clow-interest rates are why prices have risen,\u201d that\u2019s true! It\u2019s a hugely important factor \u2013 because it has driven up demand. When interest rates fall, housing affordability increases, which increases demand. People can afford more, so more people choose to enter the housing market \u2013 otherwise known as increasing demand. It all comes down to supply and demand.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For a crash to happen, we need to see a significant shift from an environment where demand exceeds supply to where there is more supply than demand. The only way prices can decrease is when supply exceeds demand.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Will that happen? Let\u2019s look at what\u2019s going on with both supply and demand.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Demand&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">A few things have fueled the extremely high demand we\u2019ve seen for the last few years.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">First and foremost, demand is driven by homebuyers. Specifically, homebuyer demand has been led primarily by millennials, which is the largest generation in the country, in peak family formation years.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"922\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics-1024x922.jpg\" alt=\"demographics chart\" class=\"wp-image-143072\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics-1024x922.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics-300x270.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics-768x691.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics-1536x1382.jpg 1536w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/demographics.jpg 1600w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many people believe investors or iBuyers are leading demand, but that&#8217;s not true.<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/investor-home-purchases-q4-2021\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">&nbsp;Investors only purchase about 19% of homes.<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;In contrast,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/fortune.com\/2022\/03\/24\/millennials-biggest-homebuying-demographic-while-home-prices-soar-worst-time-compete-boomers-aged\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">millennial homebuyers account for 43% of all home purchases<\/span><\/a><span data-preserver-spaces=\"true\">. They are the strongest and most consistent source of demand in the housing market.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, investor and second home activity are also up from pre-pandemic levels, which have supported the increased demand among primary homebuyers.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So will this high level of demand continue? In my opinion, no. There are already early signs that demand is starting to fall off, and I believe that will continue as long as interest rates continue to rise (which is probably for a few years).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Interest rates have risen incredibly fast over the last few months.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"395\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fredgraph-2-1-1024x395.jpg\" alt=\"\" class=\"wp-image-143251\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fredgraph-2-1-1024x395.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fredgraph-2-1-300x116.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fredgraph-2-1-768x296.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fredgraph-2-1.jpg 1168w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><em>30-Year Fixed Mortgage Rate Average in the United States &#8211; St. Louis Federal Reserve<\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">And although rates are still relatively low in the historical context, affordability is dropping rapidly. According to Redfin, Monthly mortgage costs were up over 43% year-over-year in March.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"741\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM-1024x741.jpg\" alt=\"\" class=\"wp-image-143253\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM-1024x741.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM-300x217.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM-768x556.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM-1536x1112.jpg 1536w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-4.15.28-PM.jpg 2014w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Redfin&#8217;s <a href=\"https:\/\/www.redfin.com\/news\/housing-market-update-monthly-mortgage-up-39pct\/\" target=\"_blank\" rel=\"noreferrer noopener\" data-type=\"URL\" data-id=\"https:\/\/www.redfin.com\/news\/housing-market-update-monthly-mortgage-up-39pct\/\">Homebuyer Mortgage Payments<\/a> Year Over Year &#8211; Apr. 28, 2022.<\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Declining affordability will have a real impact on the number of households entering the market. The National Association of REALTORS\u00ae (NAR) estimates that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.nytimes.com\/2022\/04\/23\/us\/corporate-real-estate-investors-housing-market.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">15% of first-time homebuyers<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;will be priced out of the market this year.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This is significant, but for the market to crash, which I define as a drop in prices by 10% or more, we would need this to translate from decreased affordability to a quantifiable decline in demand. One data point I track closely is the Mortgage Bankers Association\u2019s (MBA) weekly survey, which measures how many people are applying for purchase applications. At the last reading,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.mba.org\/news-and-research\/newsroom\/news\/2022\/05\/25\/mortgage-applications-decrease-in-latest-mba-weekly-survey\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">applications were down 16% year-over-year.&nbsp;<\/span><\/a><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Although -16% YoY sounds like a lot, and it is for sure, it\u2019s not been enough to slow down the market so far. Prices are still moving upward. Remember, demand was super high last year, so -16% from 2021 is still pretty decent demand, especially when considering how few properties are on the market for people to even buy.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, demand is starting to falter as prices and interest rates rise. It\u2019s just not enough to make any dent in prices or inventory, at least with the data available in late May 2022.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As I said earlier, for the market to crash, we need demand to dry up considerably and rapidly, and that hasn\u2019t happened. We just saw rates rise faster than any time I\u2019ve ever seen, and demand didn\u2019t evaporate. People are still buying. Yes, demand is down \u2013 but not in a way that, on its own, could cause the housing market to crash.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But demand doesn\u2019t operate in a vacuum. You cannot just look at the demand side of the equation. You need to look at supply, which is the big story in 2022.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Supply (Inventory)<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">In my opinion, until inventory (which I use as a proxy for supply) recovers to more normal levels, there is no chance of a housing market crash. It\u2019s just not possible.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Think about this logistically. How do prices in the housing market (or any market) decline? When sellers cannot sell their homes. Only when houses sit on the market for weeks or months will sellers consider lowering their prices. No seller is going to proactively lower prices. They need to be forced to lower the price.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s not as if sellers see rates rise and decide, \u201cI\u2019ll just lower the listing price of my home now because rates are up.\u201d Or, \u201cWow, the MBA survey shows 11% fewer applications from last year. I think I\u2019ll give up $50,000 and list my property for lower.\u201d<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That will never happen.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For housing prices to decline, properties must sit on the market for long periods of time. Only once sellers see their property sit for a few weeks will they consider lowering prices. If that happens for a couple of months, sellers might adjust their expectations for sales prices, but that will take some time.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So let\u2019s look at where we are for inventory right now.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"602\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory-1024x602.jpg\" alt=\"\" class=\"wp-image-143254\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory-1024x602.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory-300x176.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory-768x451.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory-1536x903.jpg 1536w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Inventory.jpg 1698w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">All Homes for Sale according to data from Redfin.<\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Look at the dramatic story this chart from Redfin tells. At the beginning of the housing market recovery following the Great Recession, we saw inventory (defined as the total number of active listings on the last day of a given period) at about 2M during the busy summer months. Pre-pandemic, we expected about 1.6-1.7M during the peak summer selling months.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Right now, inventory is sitting around 600k.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Think about that. In 2017-2019, prices were still going up when we had over 1.5M homes on the market. Now, we have 600k. Supply remains over 1M properties below where it was pre-pandemic.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Days on market (DOM), an excellent measurement of the balance between supply and demand, tells the same story. Pre-pandemic DOM was about 45 days. Now? Even with higher rates, it\u2019s still under 20.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"602\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market-1024x602.jpg\" alt=\"\" class=\"wp-image-143255\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market-1024x602.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market-300x176.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market-768x451.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market-1536x903.jpg 1536w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Days-on-Market.jpg 1698w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Median Days on Market (DOM) charted by Redfin.<\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">I know people like to say the market will crash because prices have gone up so much, but that cannot happen with these market dynamics. Supply is extremely low, and for the market to crash or even moderate, inventory and DOM need to increase.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We have a long way to go \u2013 I\u2019m not talking about a little more inventory. We need inventory to at least double \u2013 maybe even triple \u2013 over a few months for the market to crash.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Could that happen? Let\u2019s look. Inventory could come from three places: New listings (more people putting their houses on the market), foreclosures, or new construction.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">New listings are trending in the wrong direction, when you look at the data on a seasonally adjusted basis (which you should).&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"602\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings-1024x602.jpg\" alt=\"\" class=\"wp-image-143256\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings-1024x602.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings-300x176.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings-768x451.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings-1536x903.jpg 1536w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/New-Listings.jpg 1698w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">New Listings by month according to data from Redfin.<\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Why? People don\u2019t want to sell into this market!&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/homeowners-stay-put-as-mortgage-rates-rise\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">An estimated 51% of homeowners now have a mortgage rate below 4%<\/span><\/a><span data-preserver-spaces=\"true\">. Why would they sell into a super expensive market only to get a higher rate on a mortgage and face stiff competition for their next home? To me, it\u2019s unlikely we\u2019ll see a glut of supply hit the market due to new listing activity.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As for foreclosures, many people have been saying for two years that there will be a foreclosure crisis.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But that\u2019s not going to happen. I know people keep saying it will, but it\u2019s just not.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I\u2019ve been saying this for over a year now. There will not be a foreclosure crisis due to COVID-19 and the forbearance program. It is simply not going to happen.&nbsp;<\/span><\/p>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.mba.org\/news-and-research\/newsroom\/news\/2022\/05\/05\/mortgage-delinquencies-decrease-in-the-first-quarter-of-2022\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Mortgage delinquencies have dropped for seven straight quarters.&nbsp;<\/span><\/a><span data-preserver-spaces=\"true\">The forbearance program worked. Almost no foreclosures are happening right now, and there aren\u2019t many on the horizon. Even if millions of people went into default suddenly, it would take months or even years for that inventory to hit the market.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This isn\u2019t 2008. People have equity in their homes, and the people who have debt are well positioned to service their debt. Roughly 90% of people who exited forbearance did so in good standing.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"395\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fred-data-1024x395.jpg\" alt=\"fred mortgage debt service payments\" class=\"wp-image-143074\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fred-data-1024x395.jpg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fred-data-300x116.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fred-data-768x296.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/fred-data.jpg 1168w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"680\" height=\"503\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/mortgage-credit.jpg\" alt=\"mortgage by credit score\" class=\"wp-image-143075\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/mortgage-credit.jpg 680w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/mortgage-credit-300x222.jpg 300w\" sizes=\"auto, (max-width: 680px) 100vw, 680px\" \/><figcaption class=\"wp-element-caption\">Mortgage originations graphed by credit score according to the <a href=\"https:\/\/www.newyorkfed.org\/microeconomics\/hhdc\/background.html\" target=\"_blank\" rel=\"noreferrer noopener\" data-type=\"URL\" data-id=\"https:\/\/www.newyorkfed.org\/microeconomics\/hhdc\/background.html\">New York Fed Consumer Credit Panel<\/a>.<\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">As for construction? Could that bring a glut of supply onto the market? I don\u2019t think so.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"724\" height=\"428\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-3.25.54-PM.jpg\" alt=\"\" class=\"wp-image-143257\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-3.25.54-PM.jpg 724w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-27-at-3.25.54-PM-300x177.jpg 300w\" sizes=\"auto, (max-width: 724px) 100vw, 724px\" \/><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Construction permits and starts have increased but look at the green line above. Completions \u2013 houses that actually hit the market hasn\u2019t increased. The labor market is super tight, and supply chain issues have prevented builders from completing homes.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I think completions will tick up soon, but remember we need inventory to increase by about 1,000,000 properties to get back to pre-pandemic levels, which means construction completions would need to increase about 80% over current levels. Not very likely. As of April, permits for new construction are already starting to dip, and I expect that decline to accelerate.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Could some modest increases in construction, new listings, and foreclosures combine to increase inventory in a meaningful way? Yes, that could happen, but it&#8217;s not the most likely scenario.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Conclusion&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">As the data reads today, I don\u2019t see a crash as a likely outcome over the coming years.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">To me, the only chance of a market crashing is that we have both a significant increase in supply and a substantial decrease in demand (demand is decreasing, but not enough to cause a crash).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Instead, I believe that demand will continue to decline, which will cool the housing market. Inventory could increase slightly, but I have a hard time seeing it going up too much.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">All told, I think there is a reasonable chance prices will flatten in the coming years. Maybe even go down a bit as supply and demand rebalance, perhaps in 2023. But that\u2019s just my interpretation of the data.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Overall, my confidence interval for housing prices is plus or minus 10% over the coming two years. Prices could keep going up, but not that much. Prices could go down, but not that much. I\u2019m expecting much more moderate price changes compared to what we\u2019ve seen over the last few years.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The data, right now, just doesn&#8217;t suggest huge movement one way or another. Keep in mind that my analysis is on a national level. I think some markets could see crash-level declines while others don\u2019t decline at all. Real estate is local, but I am doing my best to summarize the housing market in one national-level number.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Of course, this is just a snapshot in time. I\u2019ll keep an eye on the data every day and keep you posted as things evolve.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_624f52525847f\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('On The Market Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/is-the-housing-market-about-to-collapse',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"has-text-align-left mt-0 wp-block-heading\"><strong>On The Market is presented by Fundrise<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png\" alt=\"\" class=\"wp-image-142373\" width=\"256\" height=\"63\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-300x74.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-768x189.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black.png 1380w\" sizes=\"auto, (max-width: 256px) 100vw, 256px\" \/><\/figure>\n\n\n\n<p class=\"mb-0\" style=\"font-size:16px\"><strong>Fundrise is revolutionizing how you invest in real estate.<\/strong><\/p>\n\n\n\n<p class=\"mt-0 has-slate-600-color has-text-color\" style=\"font-size:16px\">With direct-access to high-quality real estate investments, Fundrise allows you to build, manage, and grow a portfolio at the touch of a button. Combining innovation with expertise, Fundrise maximizes your long-term return potential and has quickly become America\u2019s largest direct-to-investor real estate investing platform.<\/p>\n\n\n\n<div id=button-custom-event-block_624f4a1837234 class='button-custom-event'>\n      <a href=\"https:\/\/t.sidekickopen84.com\/s3t\/c\/5\/f18dQhb0S7kF8cpngfW16gy-_59hl3kW7_k2841CX6NGN35Qwt3rN_mgW56Jw3w1HcgXpf197v5Y04?te=W3R5hFj26QkH2W4hJTY63T3pkxW3Fbt5S3Cdl5cf49M_4s04&#038;si=8000000019411002&#038;pi=6988e0ed-1aea-4af5-9769-8a0de4675eeb\" x-on:click=\"window.analytics.track(&#039;On The Market Blog Sponsor Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/is-the-housing-market-about-to-collapse&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn more about Fundrise<\/a>\n  <\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>It seems like every media outlet, and perhaps every person on Earth, is debating if the housing market is going to crash soon. While the truth is that no one [&hellip;]<\/p>\n","protected":false},"author":108611,"featured_media":143083,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[263],"class_list":["post-143061","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily","tag-market"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/143061","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/108611"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=143061"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/143061\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/143083"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=143061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=143061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=143061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}