Housing Market Trends for 2018 and Beyond

For many prospective homeowners, the last few years have been a challenge. With home prices continuing to rise and inventory at its lowest point in a decade, first-time home buyers and those downsizing have had to compete against many others - especially in our country's hottest markets.

With this furious pace, experts have started to look into the possibility of another housing bubble and financial collapse.

Of course, no one wants to live through another great recession. Many American families are still trying to recover from the 2008 bubble burst.

So, what's the truth? Is this current real estate situation a housing bubble? What are the indications that it could be? Could we be headed for another bubble burst?

While some market trends are showing similar signs to a housing bubble, the newest data from popular housing markets this summer says we may be heading for a slow-down rather than a bubble burst.

It may not be the best news for sellers who are hoping for a bidding war and a massive increase in their asking price. However, it's better for everyone than another recession.

2 Significant Trends of a Housing Bubble

Interest Rates

In 1997, Professor Fred Foldvary predicted the 2008 bust based on his examination of history. Interest rates tend to follow bank credit swells, which are typically to follow peaks in land value.

The cycle has repeated itself consistently since around 1800, except for the interruption of WWII.

Some experts point to today's high mortgage rates as an indicator that the market is about to bust. Interest rates are high but not as high as their peak in 2007 of 6.70% or 18.19% in 1979.

Default Rates

The rate at which homeowners are defaulting on their loans is also a predictor of an impending real estate crash. However, this rate is at its lowest, nationally, in 12 years.

The Evidence Points Toward Housing Market Cooling

Although the fact remains that you may not see much of a difference in your local market, there is emerging data to suggest that it may be the beginning of a change.

In some of the most active markets in the country, where bidding wars were common, and housing prices were being driven sky high, markets have begun to cool.

Homes are starting to sit on the market for weeks instead of just days and sellers aren't receiving multiple bids on their homes.

Existing-home sales dropped this past June for the third straight month, and new home purchases are at their lowest in 8 months.

Inventory is Growing Again

Home prices are rising still - which is good news - but not as fast. Only 6.4% this past May, which was the smallest year over year gain since early in 2017.

Prices are at their lowest increase over a 3-month period since 2012 according to the Federal Housing Finance Agency. 

Experts are predicting a 5% gain this year and a 3% gain in 2019, which is much lower than what we saw in 2007 shortly before the crash, which was 10.7%.

Takeaway

Evidence of the housing market cooling may not be welcome news to everyone. However, it's much more welcome news than another impending recession.

Sellers can take heart! Home values are still rising. And buyers can start to catch a breath.

As 2018 draws to a close and 2019 begins, the real estate market is looking like a much more comfortable place to venture into.

If you are interested in buying or selling a house and live in Southeast Michigan, please give us a call. We would be honored to help!

248-348-7200