Corder's Corner

Market Predictions: Are we headed for a crash in the real estate market?

Historically, the real estate market could be headed toward another crash mimicking the one that happened in 2008. However, there are a couple of differences that have experts predicting a plateau rather than a sudden drop or correction. In the years preceding the 2008 crash, mortgage lenders allowed some risky loans to go through without the needed verification that buyers had the needed income. Requirements currently are much tougher and have become the standard norm. Even with the lower interest rates, mortgage origination has a higher standard. Acquiring a loan is a more complex process.

Supply vs. Demand

The pandemic has affected buyers and sellers in different ways. Inventory is low and the cost of real estate is higher. People are holding on to their land longer and staying in their homes. In addition, construction costs are were higher, so fewer people are building. On the flip side, buyers are looking for land and want privacy with acres to escape the pandemic. Low mortgage rates are encouraging buyers to invest the extra savings they have from stimulus checks. People are refraining from going out or doing things because of the pandemic and savings accounts are rising. The demand for real estate endures.

Economically, analysts observe the lower wage earners being most affected by the pandemic. These lower-tiered earners typically are the people that are renting rather than owning land or homes. Unlike the mid-2000s, the rising land prices rapidly increased giving landowners equity. Experts foresee the market slowly leveling out as opposed to a crash in the real estate market. Stimulus money is helping with buying costs and down payments.

Millennial Buyers Keep Up Demand

The millennial age group is now between the ages of 27 to 33 accounting for 32.5 million people. They are active in the market trying to purchase land. Therefore, strong demand is expected to continue as listings become available and on the market.

Moving Forward

As the mortgage rates rise, the market will continue moving forward in a healthy direction, and price growth will slow. Heading into 2022, experts are expecting an increase in the inventory. Landowners that did not want to sell during a pandemic will find the time is right to list. New construction will make building feasible again. Some listings will come from landowners in forbearance due to economic hardships and the need to sell. Increasing mortgage rates in the next year will continue to gradually weed out some prospective buyers in the marketplace. Less demand with more supply equates to price growth on land slowing.

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