7 Reasons to Now Fear the Pain of Housing Market Prices Fall

A housing bubble is when housing prices are unusually high, spurred by high demand and low supply, investor speculation, and irrational spending.

The housing bubble ends when demand declines or stagnates – because of increased mortgage rates or inflation eating away at savings – and demand and supply realign (when construction catches up)

What could be the reasons people fear there could be a trend towards a housing market price fall? Read on to understand better.

Reasons to Fear a Fall in Housing Market Prices

1. High Mortgage Rates

According to Freddie Mac, the average 30-year mortgage rate is around 4.67%, the highest since 2018

The anticipation that the Federal Reserve will continue to hike interest rates is the main reason for the increase.

The cause of the present housing crisis in the United States is supply and demand and is a similar principle phenomenon that investors see in the opening range at the start of the stock market trading day.

2. Inventory Picks Up

The basic principle of supply and demand is that the less of anything consumers want, the more they are ready to pay. When it comes to housing, the more they desire it, the larger the mortgage they will take out.

3. Declining Confidence According to a February 2022 Fannie Mae survey, 70% of consumers believe now is the wrong time to buy a home. Only 43% of respondents believe home values will rise in the coming year, while 58% believe mortgage rates will increase.

Consumers are suddenly more pessimistic about purchasing and selling conditions. Furthermore, many consumers state that their household income is presently much lower than a year ago.

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