Stock market investors invest their money despite knowing the risks involved. They are well aware of the fact that prices will fall from time to time. But when it comes to buying a house, many people assume that the value of their house will remain the same.
What they fail to understand is that housing market crash is real. With real estate price continuing to rise in the face of declining house demand, the chances of a housing market crash increases.
There are several factors that could cause the housing market value to crash in 2022. If you are intrigued to know how, read the post below.
Why would the housing market value crash?
A housing market crash occurs when there is a wide-spread drop in real estate prices. For example, the median house values dropped by 18% in 2008.
A housing market crash is a possibility in 2022, and it would be the consequence of impulsive monetary policy. The fixed mortgage rates are currently at the highest. This has led to a sharp drop in housing demand. The number of mortgage applications have gone down to 50% in just a year.
If the situation continues to progress, there is a high chance that we will find ourselves in the midst of a housing market crash soon. Despite the critical situation, no steps have been taken to curb the mortgage rate hikes. So it shouldn’t be surprising if housing demand falls below than what it is now.
According to experts, the current state of the real estate market is the result of a supply-demand mismatch. At this moment, the U.S. has only a two-month supply homes, while the stockpile is of five months.
The major cause behind this supply-demand mismatch is the pandemic. It not only slowed down home construction, but also spiked the demand for properties due to 0% interest rates.
Taking the current housing market situation into consideration, a housing market crash doesn’t seem unlikely. If the predictions come true, it will help balance the mismatch between the demand and supply of houses.