The current market results from years of underbuilding, further complicated by a severe lack of skilled labor, not enough developed lots, cost of loans to finance construction, materials costs, and other regulations. Homes listed today should expect to be snatched up within a month, as its been for 83% of homes sold in March. For-sale signs are now not just short-lived, but an “endangered species,” says NerdWallet. A constant question in the air is the possibility of a crash, especially since home prices continue to increase dramatically each month. But NerdWallet says no, as the market looks vastly different from the early 2000s. And home prices will likely react accordingly to higher mortgage rates.
Will the housing market crash again?
In 2005, I was a reporter, and I wondered whether we were in a housing bubble. Most housing economists told me we weren't. Baker was the exception. He was so sure we were in a housing bubble that he sold his condominium in 2004 and rented a place, confident that he could use the proceeds of his condo sale to snag a bargain after prices fell. Less than three years after he sold the condo in the District of Columbia, prices there began falling.
If you fear that history will repeat, take this as comfort: Baker and I correctly thought we were in a housing bubble in 2005, but neither of us thinks we're in a bubble this year.
We don't think home prices will crash, but they could get involved in a fender-bender. The 30-year mortgage has been below 3.5% since April 2020. Baker says: "What happens when the mortgage rate goes to 4%, which is not high by any historic standard? Will prices fall? My guess is probably yes. It wouldn't be a crash, but there would be downward pressure on prices."
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