The real estate housing market is so weird that housing economists can not figure out if it will crash or not.
The housing market is considered to be an indication of how the economy is performing overall. So if the housing market is in recession, then chances are that the economy as a whole will also go through a recession.
A typical real-estate cycle goes through four phases: expansion, hyper-supply, recession, and recovery. However, housing economists are worried about the US housing market, because it has missed the step of hyper-supply this year. This means that if there is a recession then there is a possibility of a crash.
In a typical phase of hyper supply, there becomes an abundance of housing, because the builders overbuild. However, this time housing prices are not declining, because of an increase in supply, rather the decline is due to a lack of affordability among buyers.
There is no consensus yet among economists as to if the housing market is moving toward a recession. Proponents of recession not being an immediate threat are pointing to factors like an increase in population, strict borrowing policies, and low inventory as reasons that a housing market crash is not imminent.
What do economists have to say about the real estate housing market crash?
Holden Lewis, an analyst at NerdWallet, said “Builders haven’t overbuilt, and lenders have strict lending standards. Put those trends together, and you have a housing market that’s unlikely to crash anytime soon.”
On the other hand, José Torres, the senior economist at Interactive Brokers says “Housing is unreachable when considering household incomes and individual incomes. The percentage of the average monthly payment to household incomes and individual incomes is at record highs — similar to levels that we saw during the 2008 financial crisis. We’re going to see something very similar to what we saw during the Great Financial Crisis.”