{"id":158154,"date":"2023-09-13T14:22:00","date_gmt":"2023-09-13T20:22:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=158154"},"modified":"2023-09-13T18:23:09","modified_gmt":"2023-09-14T00:23:09","slug":"why-has-the-real-estate-market-not-crashed-yet","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/why-has-the-real-estate-market-not-crashed-yet","title":{"rendered":"Seriously\u2014Why Hasn’t the Housing Market Crashed Yet?"},"content":{"rendered":"\n

With sky-high property prices, <\/span>mortgage rates the highest<\/span><\/a> they\u2019ve been in decades, and a good deal of economic uncertainty, the housing market seemed poised for a correction in 2023. But that hasn\u2019t happened. Instead, property prices have remained flat for most of the year and, by some accounts, are actually increasing.<\/span><\/p>\n\n\n\n

How is this possible? Despite all the headwinds facing the residential housing market, how have prices remained so resilient? <\/span><\/p>\n\n\n\n

How the Economics Work<\/span><\/h2>\n\n\n\n

Let\u2019s look at the economics to understand. Property prices, like all prices in a market economy, are dictated by supply and demand. If you\u2019ve never taken an economics class or are a few years removed from your last one, let\u2019s refresh. <\/span><\/p>\n\n\n\n

Supply is essentially the amount of stuff for sale. In the housing market, we call supply inventory. Demand is the number of people who want to buy the stuff that\u2019s for sale. In the housing market, this is investors and homebuyers. Supply and demand both operate on a spectrum (known as a curve in economics) and where the two curves meet is known as equilibrium.<\/span><\/p>\n\n\n\n

Equilibrium is essentially what the market can support in terms of price and total quantity. It is where supply and demand find balance at a given point in time. <\/span><\/p>\n\n\n\n

For example, based on supply and demand at the time, the equilibrium in the housing market in July 2022 was 527,000 houses sold at an average price of $415,000. Given the many variables that impact supply and demand, this is the number of sales and the average sale price the market could support.\u00a0<\/span><\/p>\n\n\n\n

\"supply
Housing Supply and Demand in July 2022<\/em><\/figcaption><\/figure>\n\n\n\n

But, of course, supply and demand are not static. The curves shift and change over time based on the price and quantity of transactions in the market. For example, if supply increases (there is more stuff to buy) and demand stays constant, there will be more sales (quantity) at a lower price.\u00a0<\/span><\/p>\n\n\n\n\n\n\n

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