Is a Housing Market Downturn on the Horizon? Here’s the Current Outlook



Despite climbing mortgage rates, house prices are not taking a break from their upward surge. This leaves many house hunters wondering: Is a market tumble around the corner? Let's look at what industry experts project.

Market Trends: The Highs and Why

April saw a continuation of rising property values. The National Association of Realtors (NAR) observed a 5.7% increase in median existing home prices compared to last year, noting this as the tenth consecutive month of such growth. Home values have also hit new records, with the S&P CoreLogic Case-Shiller index marking a 6.5% uptick from the previous year.

While there was a brief slowdown toward the end of 2022, home prices bounced back rather unexpectedly. Experts, like NAR’s Chief Economist Lawrence Yun, assert that national price drops are unlikely due to persistent demand and a record-high median sale price reaching $407,600 in April.

The Supply-Demand Equation

What is the root cause of unyielding real estate prices? A simple mismatch between supply and demand. Despite mortgage rates peaking at 8%, the limited housing supply has held fast, maintaining high property prices. 

Bankrate’s Chief Financial Analyst, Greg McBride, CFA, and Rick Arvielo, CEO of New American Funding, concur that this scarcity is the main factor keeping prices aloft.

Housing Affordability and Market Predictions

While current trends aren't favorable for first-time buyers, as highlighted by Skylar Olsen, Chief Economist at Zillow, the housing market is unlikely to experience a severe setback. 

Even with financing costs rising — approximately $158 more per month than last May — market analysts anticipate any correction to be mild in comparison to the drastic downturns of the past, such as the Great Recession.

Why Experts Dismiss a Market Crash

The overwhelming consensus is that a crash is not imminent. According to Mark Fleming, chief economist at First American Financial Corporation, there's too much demand and too few homes available, a situation boiling down to "Econ 101."

A Brighter Future Ahead

While the market shows signs of select local price adjustments, a strong foundation of homeowners with robust credit profiles, substantial home equity, and fixed-rate mortgages positions the market on firmer ground compared to years ago. In fact, with cautious construction rates post-Great Recession, inventory remains sparse, further buttressing prices against a dramatic fall.

Though the bidding wars may persist, the market's stability speaks to an underlying strength—fewer risky loans, resilient homeowners, and a balance between opposing market forces, as noted by housing economist Ken H. Johnson.

With robust demand and responsible supply growth, the market is predicted to remain buoyant. And should mortgage rates ease in the future, we might just see a new wave of homebuyers invigorating the market even more, potentially leading to a healthier and more prosperous housing landscape for all.

Housing Support and Assistance Programs

Nonetheless, if you need housing support and assistance, there are various programs available. One of the most well-known is the Section 8 Housing Choice Voucher program, which provides rental assistance to low-income individuals and families. 

Additionally, there are housing counseling agencies and nonprofit organizations that can offer guidance and support in finding affordable housing options. It's important to explore all available resources in your area, as there may be programs tailored to your specific needs.

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