Get updates delivered to you daily. Free and customizable.
GOBankingRates
Graham Stephan: Here’s When the Housing Crash Will Happen
By Adam Palasciano, AI Editor,
2024-06-08
MattGush / Getty Images/iStockphoto
In recent years, the housing market has been a rollercoaster, and 2024 looks to be a pivotal year. Renowned financial YouTuber Graham Stephan has weighed in on the current state of the housing market, offering a detailed analysis of trends, potential pitfalls, and predictions for the future. As home prices continue to rise, despite higher interest rates and looming recession fears, many are left wondering: when will the housing crash happen?
As of now, the housing market has become even more expensive. According to Redfin, the total value of U.S. homes increased by $2 trillion, marking a 5% gain in the past year alone. Over the last two years, this increase has been a staggering 13.3%. This spike is attributed to a combination of factors, including a severe shortage of homes for sale. Many homeowners are reluctant to list their properties due to having locked in ultra-low mortgage rates. Goldman Sachs reports that 99% of homeowners have a mortgage rate below current market offerings, with 85% having rates well below 5%.
Home prices nearly came to a standstill at the end of 2022 due to fears of higher interest rates, but the market rebounded sharply. Suburban areas have seen the most significant price increases, driven by the shift to remote work and the continued unaffordability of high-priced cities. Additionally, new home construction has surged, with builders trying to fill the void left by the shortage of existing homes. New constructions now make up one-third of the total market inventory, up from 13.3% between 2000 and 2019, with new builds increasing by 21.7% from the previous year.
The Warren Buffett Factor
One of the most intriguing developments is Warren Buffett’s recent decision to cash out of the housing market. In August 2023, Buffett invested substantially in three major U.S. homebuilders: D.R. Horton, Lennar, and NVR. His shares, worth approximately $800 million at the time, have since risen significantly, leading to a $250 million profit in just seven months. This move has sparked speculation. Is Buffett bearish on the housing market’s future?
Market Predictions and Potential Crash Indicators
According to Stephan, the future of the housing market hinges on several factors. For a crash to occur, there must either be a significant reduction in demand or a surplus of inventory. Additionally, a recession could deter sellers from listing their homes due to locked-in low mortgage rates. It’s also noteworthy that 40% of homeowners don’t have a mortgage, reducing the likelihood of panic selling.
The Role of Interest Rates
Realtor.com forecasts that the average 30-year mortgage rate will fall to 6% by the end of 2024 and 5.75% by the end of 2025. Lower rates could increase affordability, pulling more buyers off the sidelines and potentially driving prices up further.
While predicting an exact crash is challenging, the current indicators suggest that a significant drop in housing prices is unlikely in the near term. Buyers should be strategic: shop around for mortgage rates, avoid getting attached to one property, lock in fixed-rate loans, and plan to hold their homes for at least 7 to 10 years to ride out market fluctuations. As Stephan concludes, the housing market has a long way to go before returning to normal, and multifamily housing might be a key solution to the ongoing affordability crisis.
Get updates delivered to you daily. Free and customizable.
Welcome to NewsBreak, an open platform where diverse perspectives converge. Most of our content comes from established publications and journalists, as well as from our extensive network of tens of thousands of creators who contribute to our platform. We empower individuals to share insightful viewpoints through short posts and comments. It’s essential to note our commitment to transparency: our Terms of Use acknowledge that our services may not always be error-free, and our Community Standards emphasize our discretion in enforcing policies. We strive to foster a dynamic environment for free expression and robust discourse through safety guardrails of human and AI moderation. Join us in shaping the news narrative together.
Comments / 0