We asked Redfin Chief Economist Daryl Fairweather to answer the 5 most Googled questions about the housing market. Check out what she had to say.
Question #1: Is the housing market going to crash?
“I don’t think the housing market is going to crash. At least not this year. What we have right now is a housing market where there is a ton of demand and very limited supply. Supply is more than 20% lower than it was last year, but there’s just as much demand. So when you have more buyers than there are homes, the only thing that can happen is that the price of homes goes up and people start competing for homes. So that’s why the housing market feels so unhinged right now, but it doesn’t mean the market is going to crash because people still have plenty of equity in their homes. And the true value of a home is actually going up because more people want homes than there are homes for sale.”
Question #2: When will the housing market crash?
“I can see the housing market getting out of hand in a couple of ways. If people start speculating on homes, if they start expecting that home prices will always go up and they start buying homes just to sell them, then that can be a real problem and lead to a housing bubble, which could lead to a crash. We’re seeing an uptick in investor activity. It’s been increasing and it’s up to 18% now and may increase even more. If investor activity starts to really surge and people are just buying homes to speculate on them, then I would consider that a warning sign the housing market could crash.”
Question #3: Why is the housing market so high right now?
“One of the reasons that prices are so high is what we talked about. That demand is outpacing supply. On the supply side, a reason that supply is so low is because we just haven’t built enough homes in this country for everybody who wants them. Millennials are the biggest generation. We’re moving out, we’re starting our own households. And unfortunately, we didn’t really build enough homes in the last decade. There were fewer homes built in the 2010s than any decade going back to the 1960s, so there’s all this demand coming from millennials and really no supply, or not enough supply.”
Question #4: Is the housing market slowing down?
“And the way the housing market is slowing down, price growth is not as high as it was back in 2020 when it was peaking. And that’s because mortgage rates are going up. Mortgage rates, when they go up, they make borrowing to buy a home more expensive and that can cause demand to cool down a bit. We haven’t seen demand cool down enough for prices to start slowing down because there are still so many people out there who want a home and [there are] not enough homes for sale.”
Question #5: When will the housing market get better?
“If the Fed continues to raise interest rates, that could slow down demand because it makes buying a home more expensive, but that isn’t really making the housing market better. It just means that there are fewer people who can afford to buy … who can afford to borrow to buy a home. The only way to make the housing market better, meaning more affordable for everyone, is to build more … that really is the answer. So, if I were you and I were upset about how expensive housing has gotten, I would reach out to my local politicians and tell them that I want more homes built in my neighborhood. It could take time. It’s not going to be fixed overnight, but that is the only real solution to why the housing market is so unbearable for buyers right now.”
*Questions pulled from Google Trends the week of February 24, 2022