The question of whether the housing market will crash is on the minds of many, given the lowest affordability levels since the 1980s. Despite these challenges, experts suggest that a crash is unlikely in the near term. Here’s why the market remains steady and what factors to watch.
A Semifrozen Market with High Demand
Today’s housing market is defined by an unusual lock-in effect: many homeowners are staying put, holding onto low mortgage rates secured during the pandemic era. This has led to a significant supply-demand imbalance, with home inventory levels at a mere 2.5 months as of mid-2024. Meanwhile, the demand continues to grow, driven by increasing household formations and rebounding immigration.
This scarcity has kept home prices climbing, with the median sales price recently surpassing $440,000. However, the costs of owning a home are rising, with annual maintenance expenses up by 26% in four years. For many, renting remains the more affordable option, with rental costs increasing at a slower pace than homeownership.
While this tight market is unlikely to crash without a surge in foreclosures or job losses, potential shifts could emerge. Aging homeowners might downsize, and higher property taxes or maintenance costs could push some to sell. For buyers, navigating this environment requires staying informed and prepared.
The housing market may not crash, but affordability and supply challenges persist. Keeping an eye on economic indicators like job growth, consumer sentiment, and mortgage rates can provide valuable insight for those planning their next move in this dynamic landscape.
