At the beginning of 2020, the US housing market was one of the leading sectors in the nation’s economy. Home sales (both new and existing) were high, purchase applications were up year-over-year (YoY) by double digits, and by February, housing starts were seeing a 40% YoY growth.
Although real estate started the year at a high point, the coronavirus pandemic brought with it the talk of a housing bubble crash. Many feared a repeat of the 2008 housing crisis and as sales essentially froze, some players in the real estate market were confident that a housing bubble crash would happen by 2020 or 2021.
However, an expert at HousingWire reports that a US housing bubble crash is not on the horizon.
A Housing Data Analyst Weighs In
My advice is to take the next three months of housing data and put a giant asterisk on all of it. Wait until July 15. By that time, we have a lot of questions answered, and we will be getting the June existing home sales report soon after that.
That was the advice of HousingWire’s housing data analyst, Logan Mohtashami, in April. Mohtashami has long believed that the housing market would see a strong recovery between 2020 through 2024. This is because, based on his model, the state of the housing market is dependent on demographics and mortgage rates and this timeframe would bring with it demographics that are favorable for the housing market.
Mohtashami chose to stand by his model during the coronavirus and told other experts to wait until July 15 to see how things will play out with the real estate market. Based on the data, he believes that it’s time that the talk of a housing bubble crash ends. Even with the COVID-19 pandemic, many other events would have to take place in order for us to see a market crash in 2020 such as:
- Fear of COVID-19 gets way out of hand
- Sellers would desperately try to get rid of their homes; at the same time, there would be no demand for homes for sale
- The government would place more restrictions on lending
As none of these events have come to fruition, it’s unlikely that we will see a housing crash in the second half of 2020.
What the Housing Market Data Says
Mohtashami accompanies his theory with the following data:
- Purchase application data from the Mortgage Banking Association has shown YoY increases over the past 7 weeks (+18%, +13%, +21%, +18%, +15%, +33%, +16%)
- Pending home sales saw a rise of 44% month-over-month
- New home purchase applications were up 54% YoY
All of this data points to the fact that the US housing market is actually in an upswing. Although existing-home sales have not reached full recovery, the market, in general, is experiencing a V-shaped recovery.
Mohtashami’s final verdict:
As long as purchase application data stays flat to positive on a year-over-year basis, housing will be fine in 2020. We have a lot of work left to do in this country. In the meantime, let go of the bubble crash thesis, because the reality is it wasn’t going to happen in 2020, even with a pandemic.
Learn more about why a housing market crash is not likely in 2020 by watching Mashvisor’s video: