Here’s why we won’t see a market crash anytime soon.
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Many of my peers and clients are asking me whether our market will crash soon. For those of us who study the market fundamentals, the answer is no—we won’t see a crash or dramatic adjustment in the next couple of years. We’ll remain in the competitive environment we’re currently in. You see, homebuyers are consolidating and working with those of us who’ve been in the market for a long time and have a good understanding of market cycles. There are seven specific reasons our market isn’t in a bubble:
1. Low inventory. Last March, there were 28 million fewer home sales in the U.S. than there were during March 2020. That’s a dramatic drop-off, and at the same time, we’ve seen a dramatic increase in demand.
2. Lack of supply. Freddie Mac reports that we’re between 3.4 and 4 million homes short of meeting current buyer demand.
3. Favorable demographics. About 50 million millennials will turn 30 this year, and millennials are expected to drive the market for the next decade at least.
4. The return of international demand. There’s been a surge of international investment here in the U.S. as things have opened back up. The U.S. is still one of the most (if not the most) attractive countries for foreign investors, and we should see investment increase as we move further into the second half of 2021.
"For those of us who study the market fundamentals, the answer is no—we won’t see a crash or dramatic adjustment in the next couple of years."
5. Low mortgage rates. The Federal Reserve helped keep mortgage rates low this spring, which really helped the market. They’ve stated that they’ll continue to keep rates low at least until 2022.
6. Tighter credit requirements. Prior to the crash of 2008, about 40% of all home loans were considered high-risk mortgages with looser credit requirements. Today only about 2% of all mortgages carry the same distinction.
7. Greater equity. About 56 million homeowners out there are considered ‘equity rich,’ which means they own 50% or more of their home’s current value. When people have more equity, there’s less of a chance of their homes going into foreclosure.
As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m happy to help.