Massive changes took over the real estate market in the past few years. It left most people wondering: Is the real estate market going to crash?
Table of Contents
- What Were Our 2022 Real Estate Market Predictions?
- What Do We Predict for the Remainder of 2022?
- Is the Real Estate Market Going to Crash?
- How Mashvisor Can Give You a Massive Advantage
- Final Thoughts
After two years of increased demand, inflating prices, and inventory shortages, many experts predicted that such changes would lead to a housing market crash. Most experts, however, will either disagree or say that it’s still too early to predict a crash.
But to understand how the market is looking right now and be able to reach your conclusion, it’s important to look at the real estate market trends that are shaping the short-term and long-term outcomes.
What Were Our 2022 Real Estate Market Predictions?
Before looking at the current state of the market and where it’s headed, let’s first talk about the last two years.
In the past two years, multiple market trends dictated the direction that the housing market was taking across the US:
- Due to the COVID-19 pandemic, people were moving out of the big cities and buying homes in the suburbs. It was due to the wave of WFH (work from home) arrangements, social distancing, and the affordability of the rural markets.
- The construction of new homes slowed down to historical levels as the cost of construction materials increased. It came as a result of restrictions on imports and increased shipping costs.
- Mortgage interest rates were extremely low, and foreclosures were almost non-existent. It is another trend that was shaped by the pandemic due to laws and regulations to make life easier for homeowners and buyers who lost their jobs or were struggling financially.
The following were the real estate market predictions that we made in our 2022 real estate market forecast in mid-2021.
What We Predicted Would Happen in Today’s Real Estate Market
When it comes to the trends mentioned above, here is what we thought would happen:
- We predicted construction costs would come down slightly,
- Buyers who were on the sidelines will be ready to enter the market, leading to bidding wars,
- Economic growth would continue throughout the year, which might lead to increased mortgage rates and resumed foreclosures.
You can read the entire real estate market forecast for 2022 to see what we predicted in-depth. Overall, most of our predictions were on point. However, when it comes to property prices across the housing market, the growth we’ve seen in the past two years is slowing down.
The slowdown wasn’t expected to happen so soon, and it is what’s leading some investors to entertain concerns about the market crashing. However, the reality isn’t as grim as it seems when you look at the market’s performance now.
What Do We Predict for the Remainder of 2022?
While the price increase’s slowed down compared to last year, it doesn’t mean that they are no longer rising. The ongoing slowdown began in December 2021.
But even then, both demand and prices were still up from the year before. It is because the market is still in a state where there is a very high demand for new homes, but very few new homes are being constructed. As a result, prices are expected to increase at a higher ratio than home sales are expected to grow.
Experts predict that 6.9 million homes will be sold by the end of 2022, but they only expect the number to increase to 7 million next year. In terms of prices, however, they expect them to be up by 6.2% this year and 2.5% next year.
With all of this in mind, let’s talk about each aspect of the real estate market trends and whether they’re expected to change or not.
Buyer Demand to Remain Strong?
Buyer demand will remain strong, but it won’t get much stronger than the current trend. In other words, there are still plenty of buyers looking for real estate, but the other dictating the market are resisting further growth in buyer demand.
Firstly, while the COVID-19 restrictions are much looser now on imports and shipping of construction materials, other issues are coming up that are prolonging the inventory shortage. The increase in fuel prices in recent months, for example, is exerting a similar effect on the construction of new homes due to rising shipping costs.
Additionally, mortgage rates are going back up, which means fewer buyers will be able to qualify for a mortgage and compete with other buyers.
Finally, people are moving back to the cities as work from the office resumes. It means there is less demand for homes in suburban and rural areas.
Generally, however, demand for housing is still moderately strong and will continue to be strong for the remainder of the year across most markets.
Housing Inventory to Recover?
As mentioned above, the inventory shortage’s been the biggest hindrance to home buyers in the real estate market in the past two years.
At the end of last year, the inventory was down by almost 27% compared to the same period in 2020. The drastic increase in property prices can be attributed to shrinking inventory, coupled with the significant increase in demand during the pandemic era.
As a result, it comes as no surprise that today’s real estate housing market is favorable toward sellers. But there is still hope for buyers, as we will see later.
For now, it’s important to keep in mind the state of the housing inventory when thinking about every other aspect of the market, as it is a central piece to keep an eye on.
How Competitive Is the Real Estate Market?
As you would expect, today’s real estate market is extremely competitive.
The trend isn’t expected to change anytime soon, or at least not until the inventory returns to normal levels. With few homes for sale and plenty of interested buyers, the market’s turned into a bidding battlefield.
In 2020, homes were selling on the market after 21 days of being listed on average. Today, however, homes are selling in less than 19 days, which is excellent news for sellers.
On the other hand, buyers will need to move very quickly when finding a good home. They will need to make generous offers if they want to compete with all the other buyers.
What About Foreclosures?
Foreclosures are expected to significantly influence the direction in which the market is going. Compared to pre-pandemic levels, foreclosures hit an all-time low during the past two years. It, of course, came as a result of the government’s COVID-19 relief measures, which saw a ban on foreclosures, so no foreclosures were allowed to happen.
However, it doesn’t mean that they won’t happen; it just means they were delayed. Now that the pandemic is over, many people expect to see foreclosures explode again. And the data from last year certainly makes it seem that way.
In September 2021, foreclosures were up by 24% compared to the previous month and a whopping 102% compared to the previous year. So, while foreclosures are still relatively low compared to pre-pandemic levels, they are expected to increase significantly in 2022.
Once they come back, foreclosures will present much cheaper properties to buyers and boost the inventory of homes for sale.
If you’re looking for a great way to find foreclosures for sale within your budget and that are projected to perform well as rental investment properties, learn how Mashvisor can help in the final section of this blog.
Is the Real Estate Market Going to Crash?
While it isn’t possible to give a definite answer, it is highly unlikely that we will see the real estate market crash in the next few years. The market nowadays is very different from what the market used to be in 2008-2010, when the last big housing bubble happened.
Firstly, it isn’t as easy nowadays to get a mortgage as lenders impose far stricter lending rulers to prevent defaults from happening.
Secondly, and more importantly, the housing supply is very low, and it isn’t likely to catch up for a few years.
How to Know When Will the Housing Market Crash?
For a housing market crash to happen, two things need to happen:
- The demand/number of buyers goes down drastically and quickly.
- The number of houses listed for sale goes up tremendously.
When the two things happen, that is when people should get worried. If it starts to happen, you will notice that houses stay on the market for longer periods, and the number of listed homes and apartments for sale goes up.
Consequently, sellers would start to lower their prices to appeal to the little demand that exists in what would become a significant buyers’ market.
While it isn’t known what would happen exactly afterward, many experts predict that it would cause panic among sellers. As prices begin to plummet, sellers will try to lower their prices further to sell fast before they lose a significant amount of money.
At the same time, borrowers will find themselves with properties that are worth less than the amount of money they initially borrowed, which would be financially catastrophic to many.
With all of that said, it is important to reiterate that a real estate market crash is highly unlikely to take place in the next few years, at the least.
How Mashvisor Can Give You a Massive Advantage
While a housing market crash isn’t something that you need to worry about for a while, it doesn’t hurt to be prepared for if it eventually happens.
And for that reason, we at Mashvisor believe that the solution we offer is highly valuable, especially in today’s fast-paced competitive market, and that it will give you an edge when it comes to preparing for the future.
What Is Mashvisor?
Mashvisor is a real estate platform that helps homebuyers and real estate investors find the perfect property for sale based on their needs, goals, and investment criteria. The platform does so by providing a wide range of tools and features that are useful for any lucrative buyer or investor who wants to achieve a solid financial future.
Our data comes from trusted and up-to-date sources, including the MLS and Airbnb, and directly from sellers who want to list their properties on the platform.
Mashvisor’s self-improving AI uses an advanced algorithm that crunches massive amounts of data. It turns the data into easy-to-understand and useful insights designed to help you make smarter decisions.
So, how exactly does Mashvisor help you in today’s market?
Mashvisor Helps You Find Properties for Sale in Minutes
When it comes to competing in today’s real estate market as a buyer, it’s all about speed.
Mashvisor lets you beat your competition and find the best properties for your investment in a matter of minutes, even in markets with thousands of properties for sale.
By using Mashvisor’s Property Finder tool, you can easily search for properties based on your available budget, the type of the property, the number of bedrooms/bathrooms, and the location. You can choose a state, city, or even a neighborhood as a location.
Additionally, you can search in up to five locations at the same time if you’re not strict about investing in a specific market.
The best part is that it will give you the results sorted by profitability. What it means is that the properties you will see at the top of your search results are the ones with the highest cash on cash return.
It brings me to another excellent feature that is inseparable from the rest of Mashvisor’s real estate investment tools.
Mashvisor Helps You Analyze Properties in Seconds
When it comes to making decisions in real estate, no matter how competitive the market is and how fast it’s moving, you never want to rush and close a deal without running your real estate analysis first.
Analyzing the long-term value of your real estate purchase, even if you’re not an investor, can help you avoid facing financial challenges in the future or even defaulting on your mortgage payments.
In today’s market, too many people are making huge mistakes and rushed decisions that will come back and haunt them in the future. To avoid doing so, you need to base your decisions on sound math and long-term value.
Mashvisor does it by using metrics like the cap rate and cash on cash return to analyze each property. The metrics are used for analyzing rental properties and calculating their rate of return on investment. They are the most common metrics to use when deciding whether an investment is worth your money or not.
When using Mashvisor, you will notice that each property can access the real estate investment calculator, where all the analysis takes place. The calculator includes a section for all closing costs and recurring expenses for owning the property, including a mortgage calculator.
The tool factors in the property’s potential rental income and any other attached sources of income. It will calculate the cap rate and the cash on cash return to let you know how profitable it would be as an investment property.
So far, the 2022 real estate market looks like a slowed-down version of what it was in the past two years, with minor differences that can snowball into long-term changes. While it is still a seller’s market with growing property prices, it isn’t too late for buyers to invest.
Smart investors will know where and how to find value in today’s highly competitive market. However, as more buyers and fewer homes enter the market, the window of opportunity is small. It is more important than ever to move fast and use tools that enable you to do so.
Mashvisor can help you greatly as it will let you find homes for sale before your competition. You make decisions quickly based on actual data and insights and avoid future financial distress.
To start using our real estate investment tools today, click here to sign up for a 7-day free trial, followed by 15% off for life on your Mashvisor subscription.