Is The US Housing Market Bubble Going To Burst Again?

US Housing Market

With the rising inflation and potential economic recession globally, there’s a lot of debate surrounding the US housing market crash. The rising mortgage rates, soaring house prices, and shortage of supply have made many people wonder about this question. Are we heading toward a financial crash? Will the US housing bubble burst? 

1- Here’s What You Should Know About A Housing Bubble

You may have heard the phrase “US housing market is booming”, but nothing can keep booming forever. With a boom, the chances of a burst are highly likely. Experts are debating if the entire home market will implode as a result of the current housing condition.

As the amount of homes for sale continues to fall short of strong demand, it’s questionable whether the real estate market will burst. Google searches for the “housing bubble” spiked in 2022. For the first time since the epidemic, FED has raised interest rates sending mortgage rates higher. The Federal Reserve’s move to boost interest rates from near-zero levels has pushed mortgage rates to a 12-year high, putting further downward pressure on house costs.

2- Is The Sharp Increase In Housing Prices A Cause Of It?

According to the Federal Reserve Bank of Dallas’s report, an increase in housing prices does not signal a housing bubble. There are rather other factors such as shifts in disposable income, the cost of credit and access to it, and supply interruptions among the economic causes for persistent real house-price growth.

i- Inflation: A Major Factor

Everyone is familiar with the high inflation prevailing worldwide. Inflation is also to blame for the booming prices in the housing market. Inflation raises the cost of building a home by increasing wages and increasing the cost of materials, suppliers, and land. Homebuilders, in turn, pass on the expense of building a new home to home purchasers and real estate investors, contributing to the rise in real estate prices.

3- The Affordability Crises

The soaring prices with the shortage of supply, competition of buyers, and rising mortgage rates have only resulted in an affordability crisis across the US. Housing affordability will be under even more strain in 2022 as there’s a prediction of rising interest rates.

However, the pace of demand is slowly going down and the supply is also gradually increasing. However, the recent increase in mortgage rates is anticipated to contribute to affordability concerns.

4- Are We Facing A Similar Situation To That Of 2008?

We all know what circumstances took us to the chaos of the 2008 financial crash and how it destroyed the US housing market. Real estate prices reached unsustainable levels due to a combination of growing housing prices, permissive lending standards, and a surge in subprime mortgages.

Are we heading in the same direction as 2008? The answer is no. Many forecasters and economists believe that the situations are completely different between the present situation and the 2000s. 

The housing bubble that set the scene for the 2008 financial crisis was a result of a mix of low-cost debt, predatory lending practices, and complicated financial engineering. This resulted in many borrowers being forced into mortgages they couldn’t afford. The situation resulted in a foreclosure crisis among homeowners as well as a credit crisis among investors resulting in a financial meltdown.

The real estate market is in considerably a better situation in 2022. Almost all American households have recovered their nominal net worth to pre-recession levels. Lending conditions have tightened in line with rising housing values. Despite the market’s improvement, there is still a significant supply and demand imbalance.

5- The Bottom Line

In today’s market, homebuyers must make difficult decisions. Home prices are expected to continue to grow, but new home production is expected to lag. This will put purchasers in a tight housing situation for the foreseeable future. As for a financial crash, it’s unlikely. The home prices, sales, and mortgage rates are expected to cool off within a year or two. Experts believe higher interest rates and inflation may cause the market to cool as buyers’ cash holdings lose value.

Contact Regentology Today For All Your Housing Concerns

We understand that buying and selling is a complex thing to do in these times. Allow Regentology to simplify this complexity for you. We connect you with the best real estate agents in your region who will get you the best deal depending on your needs and wants. Buy, sell, and get home loans and insurance today by filling out our form now!


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