When Will there be Another Housing Market Crash?


9 thoughts on “When Will there be Another Housing Market Crash?”

  1. I agree that there is not a general housing market bubble at the moment. Housing prices might stagnate in certain areas as prices begin to exceed what people can afford and may decline a bit when interest rates rise. That’s not to say there won’t be a crash, if there is it would be due to economic factors outside of the real estate market itself.

  2. For a few years now, the reason for fast rising home prices have been blamed on tight inventory. After seeing what has happened in Toronto, I’m starting to question these claims of tight inventory in almost all major housing markets (US and globally). In Toronto, within two weeks, they went from having very low inventory to having a 50% increase. Where did all of their extra inventory come from? Could the same happen to other major cities as well? It’s possible that there are low inventory in so many places due to aggressive investor speculation, which is then causing locals to panic buy. Very similar to the irrational exuberance happening before the housing crash 10 years ago. Something can trigger these property investors to sell all at the same time, and cause buyers to pull back, similar to what’s happening in Toronto. Another housing crash is possible, and it doesn’t have to be caused by bad loans like last time.

    • I find it hard to believe inventory increased by 50 percent, do you have any numbers on that? To see why inventory is low you need to look at the number of sales as well. If we were selling many more homes that would indicate inventory is low because people are buying everything up, but sales are down. That indicates it is not investors buying everything, but there are simply not enough houses for sale. That is what I see in most markets. There are not enough houses for everyone who wants to buy.

  3. “…Low-money-down loans have been available for decades, and that is not what caused the housing crash. Really bad loans to people who should not buy houses is what caused the housing crisis. …” I’m presuming this is a ‘cliff notes’ take on the market since we can’t dispense all knowledge in a post. But my quick 2 cents. As a 2nd generation broker/investor/finance degree holder, bad loans where just a part of the problem. We had funds flowing out of other ‘under performing’ investments…e.g: $’s tend to move from CDs to collectables to stocks to real estate. I’ve owned all but stocks. Further, and this a more of a localized thing, wages must support prices. Las Vegas had speculators running up prices but buyers weren’t all from out of town so prices couldn’t be sustained. Here in NW Detroit suburbs, we are seeing a lot of new industry coming in and hence price strength above what might be healthy in other parts of MI.

    • Real estate is very localized. I think the biggest difference between now and the last down turn was they are not building like crazy as they were before.

  4. I apologize for coming to the table late, but lets get the record straight.

    Lending to people who shouldn’t have borrowed was NOT the issue. Here is a summary of the causes. Do the conditions still exist? You bet!

    Subprime lending
    Growth of the housing bubble
    Weak and fraudulent underwriting practices
    Predatory lending
    Increased debt burden or overleveraging
    Financial innovation and complexity
    Incorrect pricing of risk
    Boom and collapse of the shadow banking system
    Commodities boom
    Systemic crisis
    Role of economic forecasting

    • i would completely disagree with you on the lending to people who should not have gotten loans part. I was a person who got a loan during that time. I made all my payments, but it was a stated income loan with almost no verification of income. I basically said I want to buy a house for this much and they said okay. Things are so much different now.

      Subprime lending – exists but is rarely if ever actually used. Much less than before. Read the stats in the article
      Growth of the housing bubble – prices are higher, but not because of over demand, but because of little supply.
      Weak and fraudulent underwriting practices – very rare and much less less than before.
      Predatory lending – Very rare and much less now
      Deregulation – nothing yet, maybe soon
      Increased debt burden or overleveraging – again not nearly as common as before especially for investors
      Financial innovation and complexity – to a point, but many exotic loans like 6 month arms are no longer available or stated income loans
      Incorrect pricing of risk – THe investors who bought the bad loans before are much more careful now. They will not buy any package but want strict guidelines in place for lending.
      Boom and collapse of the shadow banking system – I don’t know what you mean
      Commodities boom – I am not smart enough to comment on this
      Systemic crisis – i don’t know what that means either
      Role of economic forecasting – I think people are much more careful now than pre crash.

  5. I would agree with you, Mark. Subprime lending is available even through FHA with scores as low as 580. But the difference is that Subprime now is what it really means – people with weaker credit scores. The still have to be able to afford the mortgage as income is verified. No more sign and drive loans available.

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