Are We Headed for a Market Crash?

Lately, there is much conjecture from “Talking Heads turned Prophets” regarding the volatility in the real estate market. Some economists suggest that while there will be a slow down in real estate, there will not be a major drop. Others are comparing today’s real estate market to that of 2009, where many homes across the country fell into foreclosure. I, for one, adhere to the former thought. 

While rates are going up at what feels like an alarming rate, in perspective, rates are still significantly less than what we’ve seen over the last 30 years. Additionally, the market is not over-built with new construction. Actually, on the contrary, the demand and need for housing is still outpacing building. Lastly in this market and over the last 10 years, we see less and less adjustable rate mortgages and interest only mortgages. 

All three of the aforementioned factors were major contributors to the housing market crash in ‘09.

While it is not a guarantee that we will not see a market adjustment in our housing in the next few years, it does not mean that there is an impending crash. Like any market there will be ups and there will be downs. A steady ebb and flow of a market leads to a healthy market. The quick rise and double digit inflation may have made people feel confident and everyone was giving themselves a pat on the back for their savvy real estate investments, it was not a healthy real estate market.

An adjustment to the rate in an order to curb inflation was needed. My only critique is that the adjustment was needed a year and a half ago and the federal government chose to do nothing. Rather than slow incremental increases over the last 18 months the Feds raised the rate substantially over a single fiscal quarter. This creates so much shock in the market that it was all the ammunition the doomsayers needed to sell despair. 

But let’s not rely on people that make a living peddling doom and gloom, let’s pause and reflect on trends, the market and the overall economy. While it never feels good to see declines in the stock market or the slowing of real estate, that doesn’t mean that all hope is lost. That is a sign of a healthy regulated market which is what we should all strive for.