Due, in part, to the ongoing shortage of available inventory that is keeping home prices elevated, many economists predict that the housing market is more likely to undergo a correction from the double-digit percentage increases in home prices witnessed over the past few years, rather than experiencing a crash.
The most recent S&P CoreLogic Case-Shiller Home Price Index recorded a marginal month-over-month national price growth of 0.2%, following seven consecutive months of declines. While prices are still higher when compared to the previous year, the rate of price appreciation has recently decelerated.
Nevertheless, experts emphasize that whether home prices rise or fall in the coming months will largely depend on the specific regions. For instance, areas that saw substantial price surges during the pandemic, such as Austin, Texas; Phoenix; and various West Coast metro areas, are expected to experience the most significant declines.
Furthermore, experts highlight that today’s homeowners are in a much more secure position compared to those who emerged from the 2008 financial crisis, as many borrowers currently have positive equity in their homes. Consequently, the likelihood of a housing market crash is considered low.
During a housing market crash, one would typically observe a 20% to 30% decline in home prices, along with a decrease in home sales—conditions that are more severe than what is currently being observed. Another characteristic of a crash, an upsurge in foreclosure activity, is notably absent. However, there is some concern regarding the possibility of an economic downturn.