Housing Market Crash?

Probability of a Real Estate Market Crash: Medium

What is the risk of a severe housing market downturn in 2023? Are we at the peak of negative factors, or is there more coming in the next 3 to 6 months?

As you’ll read below, Goldman Sachs forecast is for an additional 8% decline in new home sales, existing home sales decline of 14% and for housing GDP to fall 9.2%. The buyer market however is in waiting and always becomes optimistic when mortgage rates slide a little.

Mortgage rates are dropping, but this could reflect bank’s desperation to grab some business before the bottom falls out in 2023. Self-preservation is ramping up.

The Fannie Mae buyer sentiment index actually rose 0.6 points in November to 57.3, its first increase in 9 months.  It seems that if the US market was to crash, it would need a sudden event to push it over the edge amidst a government spending pullback.

Of course, the current narrative is that banks are strong, inflation is under control, mortgage rates will come back down, and a bevy of cash enabled buyers are at the door waiting to buy. In any house of cards or artificial structure that’s constantly under attention, something could launch a slide.

What is Housing Crash Anyway?

And what exactly is a housing market crash?

A housing crash is a sudden devaluation of homes and a fleeing of more than just buyers, but instead a reduction that suggests something major has happened to the demand for homes.  

If we put a number on the decline, it would have to be a sudden crash of at least 10% to be newsworthy.  But could one slide cascade to the next? This and the catalyst aren’t being discussed right now, because no believes a crash can happen.  The consensus is a slide in the next 3 to 6 months, followed by a sales rebound.

The key is that the caustic effects of rate hikes really haven’t taken hold.  Headline inflation has receded but core inflation with food and rent has not. That suggests stubborn persistent inflation.

See the 34 housing crash factors now.

Home prices have receded this year, but for a crash to happen, we’d need a catalyst.  That catalyst would likely be a big jump in unemployment, dropping consumer spending, and a conviction that things are going to be bad for a while. Another catalyst is if real estate finance companies collapse under the pressure of fast high rates and loan defaults.  This may happen by mid 2023 (without further big stimulus).

That situation might cause sellers and buyers to react with intense emotion and make certain decisions.

How Long for Rising Interest Rates to Take Effect?

It’s understood that the negative impact of higher interest rates takes at least a year to really take effect. That’s the issue, that the strength of the economy has held off that rising tidal wave of cost.  So we haven’t met the recessionary effects yet, including: higher unemployment, unaffordability, high consumer debt and low savings for Americans.

High tax states (New York, California) are particularly vulnerable as are many of the hottest cities.

We’ve seen buyers back out of deals, prices drop, sales decline, and mortgage rates rise. All in all, it’s easy to see how as the Fed intends to raise rates that home prices might hit bottom this early spring.  The Dems are planning a $1.7 trillion stimulus spend before the Repubs take possession of the house, in a sneak move, which could support employment/wage increases and thwart the Feds goals.

The Fed raised rates this past week and reiterated further planned hikes until inflation is well down.

Mortgage rates are above 7% now and buyers are beginning to give up.  Mortgage applications and refinancing applications are plummeting to all time lows. It’s the rising rates that are drying up buyers, yet so far homes have not flooded onto the market across the country. Prices as shown below are sliding.  If the recession hits as many economists predict, home prices should slide this winter.

As the Redfin chart shows, home prices have jumped on average by 50% over the previous 3 years, so it is reasonable that a fall of 20% would prices back to pre-pandemic levels.

Home prices last 5 years.
Home prices last 5 years. Screenshot courtesy of Redfin.

Yet, the US economy has a lot of strength. Millennial buyer demand remains strong.  Job vacancies are high, unemployment still near record lows, some buyers have money, new construction has slowed, and wages are rising, so is that enough to tide the Fed threat?

Neil Kashkari talks extensively about false prophets. He says market bubbles and crashes are very complex and the source is often completely unexpected. Could the oil sheiks take the US economy down again? Could China do it? Is the $20 Trillion debt a threat?

However, in those cases where debt is fueling the asset value increase, a correction could trigger financial instability, because banks might take huge losses and potentially fail.” — Neil Kashkari.

It likely will be ultra high mortgage rates, rising unemployment, inflation, plus homeowner difficulty in paying much higher mortgage payments which results in foreclosures (rising) and the need to dump homes which are simply too expensive to maintain.

We don’t know when this big payment nightmare will occur, but we do know mortgage payments are created intense pain as more homeowners are forced to refinance.  If mortgage rates pass 10%, buyer demand will be crushed and defaults will start cropping up.

Dennis McGill, the Director of Research at Zelman & Associates, in an interview with Newsweek said “We do think there’s going to be home price declines on a national basis.. so we now expect about a 4 percent decline in 2023 and we expect a 5 percent decline in 2024” Not quite a crash, more like a slight moderation. Very optimistic outlook.

FED Between a Rock and a Hard Place

There’s a lot of stimulus money out there floating around and the FED must dry it all up while the government launches another $1.7 stimulus spend. It will have to push hard and that’s what creates the powder keg.  It’s like inflating a balloon to its limits while waving a sharp needle around it.

With high interest rates, the US debt starts to become a big problem. What if the Republicans block the Dems request for yet more stimulus infusion?  Could that be it? Or will it simply be the FED overshooting their mark, and it sets off a wave of financial events that can’t be controlled. This is what economists talk about.

Some housing experts believe we’ll see a slide but not a crash. They see the market and economy as unstoppable. But it’s creating painful inflation that the Fed and the government will have to do something about.  As the FED pushes, there may come a point in February/March where demand disappears, and more houses suddenly are dumped on the market.

What’s happening Now

The overall weight of this year’s demand factors is pushing home prices downward — rising rates, stricter lending criteria, and buyer fears that prices will be much better next spring (after a market price slide).

Quite a few prospective homebuyers are wondering whether buying a home now is a smart move. Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell 1.2 points in September to 60.8 and that was down 13.7 points compared to last September of 2021.

For some, this price slide might make it a good time, but that might be a rare situation.  Most seek big financing to buy, and that won’t be forthcoming.  The banks are in good financial position and they still remember 2007.

There might be some questionable lending going on, but not much.

Political actions and policies are playing the number one role in any housing market slide.  As time passes, rate rise, and unemployment begins to take a fall and wages sliding a little, we’ll see sales drop further in 2023.  How much of a price drop will that create? The other factors are technical such as GDP, wars, and new construction drops.

Goldman Sachs says home prices will fall in 2023

Today, Goldman Sachs released a paper entitled The Housing Downturn: Further to Fall and in it they forecast sharp drops in year in new home sales (down 22%), existing home sales (down 17%), and housing GDP (down 8.9%).  Their confidence in prices however is strange since they’re not indicating what’s keeping prices supported.

They say home prices will stall, and in fact they’re already stalling, and March is a long way off.

And for 2023, they expect another 8% decline in new home sales, existing home sales down 14% and housing GDP to fall 9.2%). The price support might come from strong wages and employment even in 2023. But will that happen? It looks short sighted and blind to some obvious threats — Russia war, China invasions and oil deals with Iran.  All sectors of the economy are stalling, even though the economy is performing okay. But is this only because of stimulus funding arriving in October?

Despite the decline, there’s still plenty of optimism — that a house is a must have item and will hold its value, and buyers will be able to make the payments.  But those mortgage payments will be really high.  And a key event just ahead might be the one that sends all markets crashing — China’s invasion of Taiwan.

Years ago, I predicted the economy, stock markets and housing markets would crash in 2023.  It looks like that was pretty accurate accept that stimulus money is keeping everything afloat. With the government spending limit reached, the whole issue of more spending leans toward recession.

It takes time for the damage to accumulate like it did back in 2006.  If oil prices do rocket again as supplies diminish, mortgage rates climb, and unemployment begins to rise fast, the housing market will be the first to plummet.

Realistically, with so much manipulation of the markets by politicians, it is difficult to forecast anything now. A sudden reaction or whim is tough criteria to rationalize. It’s the one intangible that makes all historic, technical, and common sense forecasts useless. The government could run another multi-trillion dollar spending spree and make all the doomsday people look silly, for a while.  Ultimately, we know what’s going to happen.  They’re just kicking the can down the road.

Now that stats were released during 2022, forecasters are now telling us we are in a housing downturn.

Increase Supply and Prices Will Fall

There is no need for a downturn.  This housing and stock slide is due to rising rates, and the Fed doesn’t seem to have any certainty about what they’re going to do. If they can’t predict and offer guidance, then who can?

The government says they’re only option to control the stimulus fed inflation fires, is to raise interest rates, to starve the fire of oxygen. But then, they announced the new $1.7 trillion stimulus bills. They do not support growth in US energy supply, new home construction, food production, and more that are essential parts of the inflation effect.

The new home construction and residential housing sales numbers have slid considerably. The July sales numbers reported by NAR are down substantially, a slide that began early in the year.  High interest rates and restrictive lending rules have killed demand from buyers and that down trend will continue this fall.

Housing Construction Rates USA. Screenshot courtesy of Census.gov.

We’re in a Housing Downturn

Housing sales are down, and interest from buyers is well down from what it was.   Prices are starting to fall, but given demand and cash enabled buyers, demand just never disappears.  Especially since buyers who need a home office, have to raise their kids, or who can’t manage the cost of living in their city just to remain in a rented apartment.

US Home sales history timeline chart.
Screenshot courtesy of the National Association of Realtors. Home sales history timeline chart.

Yet, with an ineffective Fed, and a hapless US government who deliver no other options than to raise rates to contain inflation, the stock market crash looks plausible too.

Home Prices Starting to Fall

Rising interest rates and unaffordable mortgage payments are vaporizing home buyers but home prices still haven’t fallen. Some cities are showing signs of a downturn.  

Mortgage applications and refinancing activity have plummeted of late given most buyers can’t qualify or afford the new mortgage rate environment. A lot of buyers have been taken out of the market. All we need now is financial troubles in the indebted via inflation, spent savings, and perhaps lost jobs. 

Mortgage rates have decline slightly, but who is able to buy anyway?

Rising Mortgage Rates peaking
2022: Rising Mortgage Rates peaking, or ready to launch upward again? Screenshot courtesy of Freddie Mac.

Zandi believes the most overvalued markets are in the South and Southwest.  Homeowners in Utah, Arizona, Colorado, Idaho, Nevada, and Florida are the most nervous. Moody’s predicts these specific cities are in most trouble:

  1. Boise City, ID
  2. Colorado Springs, CO
  3. Las Vegas, NV
  4. Phoenix, AZ
  5. Coeur d’Alene, ID
  6. Tampa, FL
  7. Atlanta, GA
  8. Fort Collins, CO
  9. Sherman, TX
  10. Jacksonville, FL
  11. Idaho Falls, ID
  12. Lakeland, FL
  13. Greeley, CO
  14. Longview, WA
  15. Charleston, SC
  16. Albany, OR
  17. Denver, CO
  18. Clarksville, TN
  19. Greensboro, NC
  20. Charlotte, NC

Kyle of Bass of Kyle Bass, Hayman Capital Management Founder and CIO explains well about the economic challenge and why a big slowdown in the fall is unavoidable.

Oil shortages and gasoline shortages are coming, increasing business costs mean business failures will increase, and inflation in food/fuel/heating will make consumer’s lives unbearable. Home building is questionable, however builders were producing more homes, and now some wonder whether this may create a glut that could assist in a big market decline.  A glut is highly unlikely.

Home prices and buyer net income going in opposite directions. Longtermtrends.com shows in their chart on the home price/median income ratio is at its highest levels ever.

Screenshot courtesy of longtermtrends.net. Home price to median income ratio.

Key Drivers of a Potential Crash

Let’s get right to the main drivers:

  • American consumer sentiment is down and enmasse, buyers give up on considering a purchase
  • deep fears of a recession begin being confirmed by rises in unemployment, poor earnings reports, and business bankruptcies
  • oil supply can’t be maintained as China/India are convicted for buying cheap Russian oil and they must stop doing that, and Europe rejects Russian carbon based energy completely — thus oil prices rocket
  • media hype as usual for clicks and ad revenue contributes to panic
  • mortgage payments simply too high to consider buying a home
  • Americans spending savings for daily living cost
  • credit costs keep rising including credit cards, home equity lines, and mortgage debt
  • builder financing costs too high thus discouraging construction
  • material and labor shortages make homes more expensive
  • stock market downturn ruins American’s 401k holdings making them fear risk taking
  • homeowners find a place to move to, so they can finally unload their million dollar properties

Low Homeowner Debt Isn’t Relevant

The US real estate housing market optimists point out that homeowner debt is low and consumers are in a strong position. The unregulated factors that created the 2007 housing crisis aren’t present. And demand for homes is still very high, with many potential buyers having cash but there’s no homes to buy.

Other economists believed inflation was transitory, however rent prices for instance almost never drop and they’re rocketing right now.  With interest rates going up, supply chains damaged, how can inflation not grow?  Investment in rental property is a passion for many given rising rent yields and tax writeoffs. Even in a crash, they will likely see minimal changes in income for at least a year or more.

But with homes selling at ridiculous levels, sometimes a million over asking price, how much of an economic shock is needed to bring that overextending, speculative house of cards crashing down?   This year, the market is expected to be strong and estimates of price growth range around 16% year over year.

In this post, we look at the factors that may bring everything down in 2023.  See the 34 Major Crash Factors for the US Housing Market below.

I’m hearing more economists and finance advisors referring to 2023 in that manner. I forecasted a 2023 recession, and cited geopolitical factors. Well, Russia has delivered on that, and the Communist Chinese will be next.  They are aligning with Russia and disobeying agreed on sanctions, even as Russians soldiers commit war crimes and bomb out Ukrainian cities.

At some future date, when pessimism rules again as it does from time to time, asset prices will decline. And if valuations across all of these asset classes return even two-thirds of the way back to historical norms, total wealth losses will be on the order of $35 trillion in the U.S. alone.  If this negative wealth and  income effect is compounded by inflationary pressures from energy, food, and other shortages, we will have serious economic problems.

U.S. households own real estate worth $41 trillion. Current Census data on median household incomes and median home sale prices suggest a price to income ratio of about 5.5 after accounting for a considerable estimated increase in incomes in 2021 (last datapoint was 2020). If this ratio returns to 4.0 – which is well above any levels prior to the mid-2000s housing bubble – this would be a 27% loss of value, over $11 trillion — Jeremy Grantham GMO. Title: LET THE WILD RUMPUS BEGIN* (Approaching the End of) The First U.S. Bubble Extravaganza: Housing, Equities, Bonds, and Commodities.

In a nutshell, Grantham says, based on historic indicators, that if a recession should happen and asset values are pushed back to historic norms, it will be disastrous.  There is no doubt this is a bubble all built on Fed debt, but if demand for housing is high and Americans have wealth, how far could prices collapse?

The jobs reports have been great and wages are rising.  Won’t this unrealized potential spend result in even higher home prices in 2022, 2023, 2024?  Millennials make up the most of the market and they’re in their family formation, high income earning years.

A potential housing market crash is more likely to occur in 2023, after the 2022 midterms where the other administration gets control.  This is because the whole system becomes unstable and under contention, perhaps in a stale mate. US homeowner debt is low we might not be looking at foreclosures, but rather just a big drop in prices.

It’s difficult to know which factors would combine to launch a crashing of the housing market. It might be a matter of watching the various pieces of the puzzle move and settle into place.

A potential war action and embargo response against China and Russia seem inevitable. The bad news is piling up for for the current administration and their popularity at an all time low. With stubborn positions on US oil production, rising rates, big regulation (including the housing market), and no big stimulus in the works, the big doesn’t look good.  Doomsayers are gaining credibility.

Much of our optimism stems from the end of Covid which should rev up world markets in the late spring. Yet what’s happening in the political arena suggests all of that may not happen.  Turnaround in government policy is unlikely. The 2022 midterms are not far away and investors are always looking ahead. If the stock market doesn’t like what it sees, could the economy follow suit.

And what happens when the zeal and furor of buyers suddenly evaporate?  How will prices react?

There are 33 signals/factors to watch below.

First Time Buyers Dropping Off

In the last two years, Covid stimulus actually boosted house prices and increased demand. Now at the end of the plague, more workers will be drawn back to the cities which is already seeing more sales of condos. Prices of condos will be supported and the pressure on house prices will be eased.

During the 12 first months of the pandemic home prices rose 15% on average across the US and that was repeated in the previous 12 months.  First time buyers were hot in the mix at 34% of all sales in 2021, but dropped to 29% in August 2022.

If interest rates rise substantially, then these buyers may face big trouble with rising mortgage payments in the coming years.  Mortgage payments in Los Angeles are up $200 a month year over year already and first timers are likely feeling the heat.  Those who have to refinance will face steep climbs, which is refinancing is down 70%.

If the Fed raises interest rates too quickly, many overleveraged homeowners, apartment landlords, and others will be in trouble. Landlords are doing better now but it will take years for them to recover their losses from the rent default pandemic era, and rent default is still high.  Could they survive another financial blow?

Screenshot courtesy of Usafacts.org.

That’s because of the work from home/office shutdown situation.  Because when residents are uprooted in any manner, they need a new living situation. That uprooting movement (from parents home or shared living spaces) causes new housing demand, which raises prices.

There is still plenty of demand from Millennials, and from those who have left their old jobs for better new jobs. Sometimes they’re in new cities, sometimes just across town.  For 2022, we have lots of demand.

33 Factors to Pay Attention To

Below are 33 major housing crash factors that could play into falling home prices in 2023.

30 Major Crash Factors for the US Housing Market (revised)

  1. buyer fatigue builds to a truly precipitous point where any event could stop all home buying
  2. Attom Data reports homeowner profit from home sales has dropped down to what it was in 2008
  3. rising interest rates add $1000 to the typical monthly mortgage ($690 now)
  4. inventory in some high tax cities begins to be dumped (New York, Boston, Chicago, Los Angeles, San Francisco)
  5. tech sector plunges on falling consumer spending and trade issues with China
  6. sellers seeing all chances of making their big real estate fortune disappear with perhaps foreclosure a possibility and they’ll begin dumping homes on the market
  7. ibuyers such as Zillow have gotten completely out of the market
  8. stock market downturn damages personal wealth estimates
  9. oil and energy prices soar and inflation rises making buying unsavory
  10. speculators believe it’s time to fully back out of the housing market
  11. rising income and property tax hikes hit middle income earners hard
  12. home prices falling faster and the momentum begins to take over
  13. government takes radical move to “correct the situation” by instituting tough new rules
  14. China/US conflict sends stock markets crashing (Taiwan invasion/war maneuvers)
  15. Russia steps up careless behavior in the Ukraine
  16. economy goes into high speed wobble inviting drastic government intervention for debt issues
  17. big rise in tax on corporations and billionaires causes wealth to flee the country
  18. stock market at peak volatility and earnings outlooks dive (investors tuned to earnings now only)
  19. bankers quickly anticipate trouble and begin tightening mortgage lending with higher rates
  20. the Fed has to raise interest rates too quickly in 2022 to cover debt/capital needs,  and given the size of home loans, a 1% increase would create defaults and panic selling
  21. countries around the world plunge into bankruptcy while their economies stall
  22. debt in the cities most likely to crash hits a critical point
  23. Republicans gain new power in 2022 elections and push for reforms
  24. Republicans block excessive spending (their belief that it’s frivolous and wasteful)
  25. an attempted return to globalism which would wipe the US dramatic gains of the last 3 years and push the US trade deficit out of control (closing in on $1 trillion per year)
  26. “America First” dream fades accompanied by dramatic drop in purchases of China products (trade war) and higher cost business environment for US companies
  27. single-family housing construction permits decline spooking home sellers
  28. homeowners who have hung on forever to sell, begin to find somewhere else cheaper to live and begin selling en masse
  29. massive student loan and personal debt defaults as unemployment rises
  30. yield curve inverts again severely thus scaring the financial community

It’s Not the Same as the Financial Crisis/Crash

Economic and lending circumstances today are different.  There are no mortgages to zero income zero down payment people, fewer mortgage holders are underwater, homeowners have more savings and stock market portfolios are hefty.

Technical financial factors are often spoken about by economists and brokerage companies and bankers. But in each case, the issue is dissolved when the government prints money and kicks the problem down the road.  Like someone in Vegas with a credit card, the consequences are waiting for them back home later on.

A Few Housing Market Experts Expect Demand to Fall

The US administration as mentioned, could take a hard line to crash the economy, but it would cost the election.  Biden has woven such a complex web of problems, that there’s no way out.  Crushing the economy would take demand way down to ease inflation, home prices, and more. Yet inflation is likely not to fall so fast.

Should you sell your house fast this summer? Well, you should hire a Realtor with a solid real estate marketing capability to help you get what the market will bear.  2023 poses a threat in that stimulus money may slow in that year. As things slow, speculators may give up on real estate. Construction may pick up and interest rates could rise thus easing the competition for houses for sale.

The Timeline of Housing Market

This scary looking roller-coaster timeline of market corrections and crashes indicates that when the next does happen, it could be horrific.  We have to consider what keeps the cart on the track and what will send it plunging.

Some homebuyers still haven’t recovered from their losses in the 2008 collapse (caused by defaults on consolidated mortgage-backed securities).  Their home values plunged 30% and over 9 million lost their homes. Right now, 2.7 million homes are in mortgage forbearance.

Those who wish to refinance will be looking at big hikes, and a good portion of mortgage holders are deeply indebted. And we’re not at the end of rent moratoriums, and we know most renters won’t be able to pay back the rent they owe.

Crash forecasts are revolving around interest rates and government bankruptcy, but the real threat this time is government meddling.  The US administration thinks it has control of the macroeconomic factors, and that a mountain of debt and regulation squeezes, high energy costs, and rising taxes aren’t a problem.

Commercial real estate is in severe trouble without stimulus because cities won’t be the same after the pandemic.  That debt issue isn’t going away, when companies realize workers aren’t coming back to their highly overpriced offices.  And many businesses are buried in huge debt going into the economic recovery.

The economy is rocketing (will reach 10% growth) but putting the breaks on just your dragster is ripping down the runway is not good. Some would call this a high speed wobble, where there is no control.

Once the governments get really scared (will New York City go bankrupt?) they’ll restrict mortgage qualifications, raise interest rates, which begins the process. Once everyone sees where the economy’s headed they start bailing out.

This Housing Downturn Could be a Political Event

It’s the political factors that are key this time because the economy will do well for at least 2 years until stimulus runs out. There’s little support for the economy post stimulus, and China Trade deficit has reached $70 Billion per month.  What if the US dollar was suddenly devalued in international finance?

When Do Housing Bubble’s Burst?

Markets always slide right after they reach big bubbly price highs which don’t match what consumers can afford, and as supply increases and buyers and mortgage holders lose their jobs.  And buyers keep spending big with bubble cash.  An event or series of small uncontrollable financial events can cause housing purchase demand to retreat as people withdraw from big-ticket purchases.

A stock market crash could coincide with the housing event and stock prices are highly inflated, not supported by real earnings.

This could be all about hyperinflation, political mistakes, and baffling complexity.  This situation is novel, just like Covid 19, which means fear and misunderstanding will sweep in like a cold winter wind.  The fact is, most Americans cannot protect themselves. They are at the full mercy of the economic machine.

This out of date graphic from NAR shows a trend that is continuing — high rent growth with wage stagnation.  The situation for renters is unbearable, as more Americans find themselves homeless.

Screenshot courtesy of NAR

We might understand a stock market correction, but with the stock market forecast on a volatile but upward trend, one more Trillion dollar Federal aid package, growing American wealth, $4 to $5 trillion in the money markets, improving economy and good jobs report, and the confidence of a great nation still intact, is it even conceivable we could see a stock market crash?

Actually, the 2022 elections alone might be the catalyst for a housing and stock market bubble catastrophe.  The current regime have called for drastic changes, based on ideology and their political preferences.  Trashing fracking, bailing out blue states and cities, out of control stimulus spending, with renewed regulation and higher taxes, hasn’t been factored into forecasts.

Printing Money Out of Control

By printing trillions of hand out money, inflation is the result. Home prices rocketed, commodity and goods prices rose, and stock prices are grossly overvalued (54 x price earning ratio for Tesla stock).

The issue of money printing is only one factor.  The out of control spending now taking place, was well beyond the imagination of financial experts when they warned about spending.  The national debt is about $33 Trillion now, a number no one forecasted or imagined, so the issue of US crashes is real, not a fear tactic.

The US is maxxing out its credit cards. What happens now?

Cities such as Austin, Dallas, Houston, Los Angeles, San Diego, Los Angeles, Baton Rouge, Bismarck, Anchorage, Casper, Midland, Lafayette, Bakersfield, are cities most likely to crash.  The cities of New York, Chicago, and San Francisco are in a poor financial state so floating these cities will drain state and federal funding. In California, the debt troubles and social malaise are shocking. That beautiful place looks more and more like a battle zone with homeless encampments throughout the state.

Housing Market Crash Timeline

What would a timeline for a housing crash look like?   Buyers look sometimes to the past to see if there are corollaries to guide them on when housing prices might take big drop.  Stock market investors look to history timeline charts too, but with more conviction that they’re relevant.

We’re definitely in a bubble, but the inflation effect is far from over. Given stimulus money and a recovery, we might not see a drop until major political conflict, change, or interest rates are pushed up too fast. That could happen if the US government can’t pay its debts.

The debt crisis is a major crash factor that few are talking. Experts have said however that the US could just keep spending forever. No one has explained exactly when or how the debt crisis will manifest itself.

Now as we enter 2023, amidst high inflation, persistent housing shortages, and a stretched out recovery that may not happen,  we have to agree with new estimates of a 20% downturn.  The bidding wars will continue, but buyers will try to get more creative.

The secondary mortgage market might try to come up with new solutions for borrowers, but without housing stock, there’s not much anyone can do. Mortgages are simply too expensive.

Which are the cities most likely for a housing crash? Which cities should you buy property in 2019?

How Vulnerable is Your City?

Yet, investors and homebuyers should still be concerned about a housing bubble in their cities. Not all states have recovered from the last recession, nor benefited from any Obama era Federal government policies.

In late 2021, could the Fed ratchet up interest rates to pay for all the stimulus?  In fact, almost every recession, housing downturn, or major catastrophe has been aided by fast rising interest rates. These rate spikes kill off business and put extreme pressures on mortgage holders. Markets collapse quickly then interest rates are quickly lowered.

This transition to a US centered economy over many many years, still puts the country into a vulnerable period of uncertainty and GDP risk.  Will companies build factories here or instead hold off and hope for a Trump loss in 2020?

Unfortunately, “soft landings” after rate hike cycles are as rare as unicorns and virtually all modern rate hike cycles have resulted in a recession, financial, or banking crisis. There is no reason to believe that this time will be any different — Forbes report.

Crashes Historically Follow Price Bubbles

Markets fail when you least expect them to. After reading this post, you’ll see how easy it could happen from California to Texas and New York to Chicago. What will stop the dominoes from falling?

Don’t we learn from history?” Perhaps history can only tell us whether the housing market 2020 is headed on a downward path, but can’t really say when or how it will happen, which cities might crash.

Zillow polled 100 economic experts about the economy and they believed a recession was coming in 2020. It would have happened if the Covid pandemic hadn’t occurred.  Have we seen the end of stimulus inflation?  More stimulus would create more inflation and trillions more are already stuffed into the money supply.  That money still in stocks, crypto, and bank accounts could start chasing too few houses in 2022 leading to an event in 2023.

Check the stats and forecasts for the Denver housing market crash, Chicago housing market crash, Boston housing market crash, San Francisco housing market crash, Philadelphia housing market crash, and New York housing market crash.

Cities Most Likely for a Downturn

Are you looking for the best cities to invest in real estate or to avoid those metros most likely to crash? The best cities to buy rental properties gives you a peak at the potential of rental property investment.

Is this the right year to buy a rental income property?   Should you sell your house, and when is the best time to sell it?

Rising mortgage rates, inflation, reduced housing supply and high home prices threaten the markets, it appears 2002’s real estate scene will stay strong. Realtors may want to build their presence this year as house prices decline in 2023. Lower prices will bring plenty of homes onto the housing market and boost your opportunities.

See sales and price stats on other cities, including Denver, Austin, San Diego, Los Angeles, Dallas, New York, Boston, Atlanta and in the Florida housing market in Miami and Tampa.