Could the US Be at Risk of Another Housing Market Crash?

After the global recession back in 2008, it’s natural for investors to fear another crash in the housing market. Over the past year, the global COVID-19 pandemic has caused lots of uncertainty for all. As people were told to stay at home, experts believed the long-awaited housing market collapse was going to happen. However, despite all the odds, the resilience of the market shone through and survived. While other areas have struggled, the housing market has actually proved a strong support structure while the United States economy recovers. We aren’t necessarily suggesting that you hire an affordable moving company in NYC, and head out west. We are suggesting that at the moment, the housing market appears to be stable during the recovery of this pandemic.

Despite everything that happened in 2020, the number of homes sold increased from 2019 by over 5.5%. In total, Zillow Economic Research said that over 5.6 million homes were sold across the country. In fact, the market is so hot that buyers are being told to act with precision and speed to avoid disappointment.

Now, the number of sales is pushing past the 2005 housing boom. However, the reasons for each boom are very different. Back in 2005, negligent lending caused a boom in the market. 16 years later, low mortgage rates and high demand are causing the numbers we’re seeing. Of course, both of these causes are a direct result of the COVID-19 pandemic. Prices were certainly increasing before, but the pandemic has increased the speed somewhat.

Are we at the precipice looking over the edge? Is everything about to change in the housing market? Well, predictions for 2021 suggest otherwise. As uncertainty around the pandemic continues, so too does the growth in house prices. Returning to Zillow Economic Research, it believes that, by the end of February, house prices will have increased by a further 3.6%.

What’s more, Zillow has made further predictions for the year ahead. By the middle of 2021, there could be a 13% to 14% increase in annual home value growth. By the end of the year, house prices could rise by over 10%.

It doesn’t end here – Zillow believes that we will see the most house sales since 2005. With strong demand and extremely low mortgage rates, nearly 7 million sales could process in the months of 2021. As supply struggles to keep up with demand, basic economic principles show us that prices will continue to rise as the year goes on. 2021 is also going to be a year of clearing a backlog for many agents from when the country was in lockdown between March and July.

All the statistics point to one thing – a market that can compete in strength against the housing bubble. Lots of attention has been on the demand side in this guide, but prices are increasing due to events on the supply side of the equation too. For the first time on record, inventory in 2020 dropped below 700,000. Over 2020, inventory across the country fell by nearly 40%.

In December alone, 66 days was the average duration a property spent on the market. In December 2019, the same statistic was much higher at nearly 80 days. In 2021, supply will recover, but nowhere near enough to cope with demand and this is why the United States should avoid a housing market crash this year. Demand is recovering faster than supply, and this will keep pushing prices in one direction – up.

Even if reality doesn’t quite match up to expectations and the Zillow projections are too high, a housing market crash is still unlikely in 2021. The market is a seller’s market, and this isn’t set to change any time soon.

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