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Seventy-eight percent of community bank executives believe the U.S. housing market will crash at some point in the next four years, according to a survey published last Wednesday by software firm MANTL and Wakefield Research.
Home prices have risen 18.1 percent in the 12 months ending 31 August, according to data service Corelogic, the fastest climb in 45 years, driven by high demand, an increasing shortage of new homes, and rock-bottom interest rates.
Home prices are now higher than their peak just before the housing market’s 2007 collapse helped to trigger the Great Recession.
U.S. homeowners are cashing in their windfall, taking more than $63 billion in home equity loans just in this year’s second quarter and adding to their home-related debt, data firm Black Knight reported.
However, not everyone sees the housing market as heading for a fall.
When the market collapsed at the beginning of the Great Recession, 40 percent of homeowners with troubled mortgage loans had at least 10 percent equity in their homes; today, 98 percent do, according to Black Knight.
Also, the rate of home price increases has begun to ease.
The median U.S. price rose 1.3 percent in August, compared to 1.8 percent in July, more homes are available for sale, and fewer homes are drawing bids tens of thousands of dollars over the asking price, as we reported in “Demand for Homes Cools Amid Record Prices” (17 Aug 2021).
TREND FORECAST: As we have long forecast, the housing market will go down when the U.S. Federal Reserve raises its key interest rate above 1.5 percent. That will happen long before 2026, probably as soon as next year if inflation fails to ease significantly in the next few months.
NOTE: When the housing markets slump, private equity companies—as they did before and are doing now—will keep buying up more houses to rent… because less people will be able to afford to own homes despite price declines.
And, unlike the Panic of ’08, the current real estate boom was not artificially propped up with subprime mortgages. Those who have bought homes since the COVID War began, could afford them.