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Why The Housing Market Isn't Headed For A Crash

Navi Persaud
May 03, 2021
Photo of a new house for sale.

While the housing market has an added spring in its step, fears of a housing crash are certainly there for many professionals in the industry. However, a Bankrate report from Jeff Ostrowski looks to ease those worries.

While he noting that price appreciation is worrisome, Ostrowski's report listed six reasons why the housing market is not headed for a crash. According to the report, record low inventory, builders' inability to keep up with demand, low mortgage rates, an influx of new buyers, strict lending standards and muted foreclosure activity will prevent the housing industry from a future crash.

"The National Association of Realtors says there was just a 2.1-month supply of homes for sale, up marginally from February’s 2.0-month supply," according to Ostrowski's report. "That explains why buyers have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future."

"The fundamental reason for the run-up in price is heightened demand and a lack of supply," added Greg McBride, chief financial analyst, Bankrate, according to the report. "As builders bring more available homes to market, more homeowners decide to sell and prospective buyers get priced out of the market, supply and demand can come back into balance. It won’t happen overnight."

"I’m not worried about a housing bubble," noted Ralph McLaughlin, chief economist at financial technology firm Haus.com, according to the report. "The fundamentals are all there — low supply combined with growing demand for homeownership — to suggest the overheating we’re seeing in the housing market is not based on animal spirits but on an unfortunate and coincidental series of market forces over the past year."

Click here to read more from the report.

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