What’s new lately with housing? Are we headed for a market crash?

Any new homebuyers (or sellers) out there? (Photo by Kindel Media from Pexels)

Just in the past few weeks, the Biden administration announced it would take steps to address a severe housing shortage in the U.S.

President Joe Biden now plans to create and sell about 100,000 affordable homes over the next three years using existing funds, according to the White House.

“Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but a shortage of homes for sale and supply chain bottlenecks have driven housing prices sharply higher,” as a Reuters report said. “Rental prices, which typically follow the lead of house prices, are also a big concern, given that even before the pandemic, 11 million families -- or nearly a quarter of all renters -- were already spending more than half their income on rent, according to the White House.”

This latest news from the Biden administration will hopefully limit sales to large investors, and instead help individuals, families and nonprofits.

One out of every six homes purchased in the second quarter of 2021 was acquired by investors, and reports indicate that in some markets, that number is one in four. Within investor purchases, typically more than 35% of purchases are made by investors that own more than ten properties,” the White House statement said.

And that’s all good news then, from the White House, when it comes to access to affordable housing in the coming years.

So, when it comes to how red-hot the market has been, which has now been the reality for the past year or so really, it made us wonder: Are we headed for a housing collapse? Will the bubble burst? What’s next?

Some insight from Forbes

“The confluence of factors that have led to this point has many comparing the current market to the previous housing bubble, which begs the question, ‘Is a crash imminent?’ However, comparing the current housing market to that of the early 2000s is not exactly apples to apples.

“A major contributing factor to the last housing bubble and 2008-09 recession was excess housing supply. At that time, home prices were increasing at the same time that more supply (new construction) was being built on top of an already excess supply of homes. Now, the opposite is happening. The housing market is being driven by a limited supply and heavy demand.”

So in short -- no. The author doesn’t think a housing bubble burst is coming. He ends with this: “The housing market is far from headed for a crash, in my opinion. In fact, the indicators discussed here give reason to be optimistic about the long-term outlook for residential real estate.”

What Fortune has to say

In an Aug. 30 report called “Why we won’t see a housing market crash anytime soon,” Fortune points out that the housing market has seen median home prices soar an unprecedented 24% since the COVID-19 outbreak last year.

And yes, in recent weeks, perhaps things are slowing down just a bit.

But again, the author makes some of the same points as in the first article: “When you look under the hood, the run-up to 2008 housing bubble and the hot 2021 housing market are very different bull markets.”

This Fortune writer doesn’t think the latest housing frenzy will result in a bust.

“A supply glut is unlikely to return anytime soon. That’s the No. 1 reason a housing market crash is unlikely. Sure, price growth could go flat or even fall without a supply glut -- but a 2008-style crash is improbable without it.”

And: “Another reason a crash is unlikely: When factoring in income levels, housing costs are lower now than heading into 2008. Leading up to the foreclosure crisis, 7.2% of U.S. personal income was going toward mortgage payments. In 2021, that figure is just 3.4%. In part, homebuyers have the pandemic to thank: It spurred low interest rates and lowered mortgage and PMI (private mortgage insurance) payments.”

So far, it doesn’t sound like people should be worried.

And from MarketWatch ...

People are typing into Google phrases like, “When is the housing market going to crash?” according to MW, which added that this particular search was up 2,450% over the past month (although the report was published this past spring). Still, interest is piqued! It definitely seems like we’re searching for explanations about why the housing market is so hot to begin with, and what’s up with home prices now that we’re well into 2021.

“We’re not going to see a crash in the housing market, but we are expecting some cooling on the really unsustainable growth rates that we saw, particularly in 2020,” said Robert Dietz, chief economist at the National Association of Home Builders, to MarketWatch. “When home prices are growing faster than incomes, ultimately, that is an unsustainable trend.”

Florida is also experiencing some potential overheating, according to Ken. H. Johnson, a real-estate economist and associate dean in FAU’s College of Business. And a big problem for home buyers right now is that there are not many properties to go around. Read more about that.

So, cautious optimism is likely in order. It doesn’t seem like we’re on the precipice of a bust, at least not any time soon, but as always, we want to make sure we’re choosing the right decisions for ourselves, our finances and our families. The situation remains fluid.

The next episode of “Solutionaries,” our solutions-based journalism show, will air at 8 p.m. on Sept. 20.

This time, we’re talking all about affordable housing and the market.

So far, we’ve found person-to-person quick fixes and looked across the country for larger, systemic solutions. And we’re still searching for input. Watch the trailer below and please reach out with thoughts on this critically important community issue. You can email us at solutionaries@grahammedia.com or take our Affordable Housing Survey.