The U.S. residential real estate market certainly isn’t in “crash" mode – at least not yet.
That’s not stopping home buyers and sellers from hitting the internet to check on the health of the nation’s housing market. In doing so, digital users may be fanning the flames of a housing market crash, simply by making the term “housing crash” a household term on the internet these days.
As usual, the data tells the story.
According to a new study by the luxury brokerage company RubyHome, internet search interest for “housing crash” skyrocketed 177% since August 2021, reaching an all-time high for the term since Google Trends started reporting in 2004.
“The spike in searches about a housing crash suggests homeowners, particularly those thinking of selling, are increasingly nervous about their market timing,” the RubyHome report stated. “If interest rates keep going up, purchasing power will continue to erode, putting more downward pressure on home prices until they reach parity with what people can afford.”
“Said another way, sellers will eventually have to capitulate,” the report added.
A Decline, 'Yes' ... a Crash, 'No'
There’s no doubt the U.S. real estate market experienced inflated prices over the past two years, and there’s equally no doubt those prices will decline. But a housing crash? Not likely, experts say.
“The housing crisis of 2008 taught us what a real housing crash looks like,” said Joshua Massiehm, chief executive officer at Pacwest Funding and Real Estate in San Diego. “Based on that time in history, our current real estate market climate is steady and more stable.”
According to Massiehm, the real estate market should see a small 5% correction from the peak of late 2021 and early 2022 housing prices, but the market will not see a 30% drop in prices. “I think we’ll see prices stay stable for some time,” he told TheStreet. “We’re essentially going back to a normal housing market where interest rates stay in a realistic range and home prices appreciate slower than they have in the last two years.”
Other housing gurus say that builders are taking things slow, which is tamping buying activity down.
“The U.S. housing market is primarily stable,” said Carol Horton, chief marketing officer at Texas-based homebuilder Kindred Homes. “There’s been a pullback with buyers, but there’s still plenty of demand for housing. Some of the larger builders are pivoting and going into build-to-rent and multi-family products. Diversifying their product will allow builders to balance out their revenue stream.”
However, builders are slowing down on permits/starts to help offset the slowdown in demand. “Builders have a record number of homes currently under construction,” Horton said.
Horton also isn’t predicting an imminent “housing crash”.
“Pricing is not collapsing but facing more of a market correction,” Horton told TheStreet.com. “Currently, there is a record level of equity by homeowners, which was not the case during the 2008 crash. Additionally, there are record level low vacancy rates, meaning the available vacant homes. In 2009, there were record-level high vacancy rates.”
One surmountable problem is that many buyers have panicked over the rising interest rates and are canceling contracts.
“However, interest rates are still extremely low historically,” Horton added. “Those rates should normalize, and buyers will invariably return to the table. Their buying power may be reduced, but there is still a vast need for housing.”
Tips for Buyers
In a seemingly imbalanced real estate market, buyers may be easily spooked. But there’s one area where opportunity may shine.
“Now is a great time to buy new construction,” Horton said. “If you plan on being in a location or a home for at least five-to-seven years, it makes sense to purchase and write off the mortgage on your taxes. Many builders are offering large amounts of money to go towards mortgage costs that can help lock low rates or even buy the rates down so you can qualify for more money.”
Additionally, many builders are beginning to negotiate.
“Now is an excellent time to ask for a builder to throw in upgraded light fixtures, appliances, etc., to get the deal done,” Horton added.
If you already have a contract with a builder, but a rate increase is pricing you out of the home, ask the builder for a lower interest rate or for a pricing discount.
“Many builders would rather discount the home than lose the contract altogether,” she told TheStreet.