The world economy has faced many challenges in the recent past, one of which is the COVID-19 pandemic. While it has left many in uncertain financial positions, the housing market has been able to weather the storm better than most other markets. From coast-to-coast, people are asking what the future of the housing market holds. Many are predicting a crash, but not everyone is on the same page. Here, we’ll discuss why the market isn’t going to crash, according to the New York expert lender.
Loan Requirements are still Stringent
One of the key indicators of a housing market in trouble is a rise in the number of people defaulting on payments. Many experts point to the pre-2008 recession, where it was far too easy for people to become homeowners, resulting in a sea of bad loans. Thankfully, today, loan requirements are stringent. Those looking to purchase a home must have the income and credit score to back up their loan. This leaves less room for default and, therefore, less chance of a crash in the market.
Interest Rates are Historically Low
Right now, the market is experiencing extremely low-interest rates. This makes homes more affordable, and as a result, more people are interested in buying homes. The low-interest rates have brought in a flood of qualified, serious buyers, which put upward pressure on the market. This, in turn, has protected it from a crash.
Lending Practices have Changed
Since the 2008 recession, there has been an influx in lending regulation to protect against a rise in subprime lending. Lenders are now required to provide reasonable and good faith loans, with documentation and evidence supporting the borrower’s ability to repay the loan. The result has been a decrease in foreclosures and default rates compared to before.
Increasing Demand vs. Limited Supply
The real estate market has always been about the law of supply and demand. We’re currently seeing an increase in buyer demand and a limited supply of homes. A limited supply coupled with high demand means prices could go up, not down, which is not a sign of a market crash.
Millennial Buyers are creating Positive Forward Momentum
Millennials make up the largest group of homebuyers today. They have seen the impact their parents’ recession had on their families, and so, they proceed with caution when looking to buy their home. Their carefulness has kept the market from ballooning into another bloated bubble. As millennials enter the market, they will drive market growth, rather than bust causing it to crash.
In conclusion, it is not realistic to expect a crash in the housing market any time soon. The market has proven resilient despite the recent pandemic, thanks to stringent loan requirements, historically low-interest rates, more-regulated lending practices and increasing buyer demand with limited supply. Millennials are driving the forward momentum of the housing market with their cautious approach to entering the market, which should prevent a crash from happening. If you’re a homebuyer currently in the market, the future is looking bright, and we hope this article has helped put your mind at ease.
