The US housing market is beginning to slow after months of record-high house prices, rising mortgage rates and a shortage of inventory that has forced buyers into merciless bidding wars.
That slowdown, which could eventually lower home prices, could also go in a completely opposite direction, one that economists fear: a market crash.
According to Moody’s Analytics, house prices rose by an average of 16 percent nationwide in the first quarter of 2022. But while prices have increased across the country, the changes have not been the same in every state.
While many states have seen home prices rise less than 12.5 percent, 11 states have seen home prices rise more than 20 percent. These are:
- North Carolina
- South Carolina
Fueled by a severe housing shortage – fueled by the lingering fallout from the 2008 financial crisis and the pandemic – and the migration of people, thanks to the opportunity to work remotely, across much of the country and particularly in these 11 states across the whole move land, houses are overrated.
According to Moody’s Analytics, homes are even more overvalued today than they were during the housing bubble of the 2000s. For some, this situation points to the possibility that the market could crash, starting with these 11 states.
But top economists at Moody’s Analytics believe the market is more likely to correct than crash.
“I don’t think we’re going to see a crash for a number of reasons,” said Mark Zandi, chief economist at Moody’s Analytics news week.
“First, the market is very tight. In the physical market, vacancy rates are pretty close to record lows and in the sales market, they’re at record lows,” Zandi said. “Lending has been very good since the financial crisis. Underwriting is strong. The 30-year, 15-year fixed-rate mortgage is nothing exotic, nothing complicated.”
“It takes a lot of defaults in distressed sales to bring prices down a lot. And I just don’t see it,” Zandi explained. “It would only happen if we got into some kind of stagflation with very high interest rates and very high unemployment. But that doesn’t seem likely.”
“Our fundamentals are a lot better than they were before the 2008 crisis,” agreed Thomas LaSalvia, chief economist at Moody’s Analytics.
“Demand has been pretty strong lately. The offer was relatively weak. We don’t have the credit problems that plagued us last time. Homeowners and the job market are in better shape,” he said.
“There is some excess savings out there, actually still worth over 2 trillion. […] There are people who own these homes right now who, even in a downturn, would probably still be able to pay that mortgage and not have to give up their keys. And there won’t be many of those distressed sales that happened in the 2008 crisis,” LaSalvia explained.
As home prices have reached levels that make it impossible for many to afford homes, home sales have started to fall, leading to a slowdown in the US housing market. It remains to be seen whether there will be a crash or a market correction.
https://www.newsweek.com/housing-market-crash-could-see-values-homes-plummet-these-11-states-1720651 Housing market crash could see home values plummet in these 11 states