6 Painful Reasons To Fear the Financial Hit of a Housing Market Crash

The housing market seems to be on standby as home prices continue to rise–the median listing price hit a new high of $405,000 in March. Mortgage rates continue to increase, and buyers refuse to back down.

Six Signs Of A Housing Market Crash

1. The Downturn In The Economy

The overall economy is one of the earliest indicators that the housing market can collapse. While property markets are very local, and a market downturn can differ from neighborhood to neighborhood, the economy is a decent overall indicator of the national condition of affairs.

2. Rising Interest Rates And Mortgage Rates

The fact that interest rates are rising is a strong indicator that the housing market is cooling. When interest rates are low, the property is in more demand; When people buy a house, they want to lock in a low-interest rate.

3. Declining Consumer Confidence

The interesting thing about markets is that they often change based on how people feel about them at the moment. When consumers become hesitant about buying or selling, it’s a warning sign of a housing market crash.

4. Decrease In Property Value

Homes are a valuable asset that increases in value over time. The average annual appreciation of a home is between 3.4 and 3.8%. The land is a finite resource and is a part of a house. Hence, homes are valuable.

5. Foreclosures Are Up

More foreclosures indicate that more people are unable to pay their mortgages. It implies there will be more houses on the market. Thus prices will decrease due to oversupply.

6. Equity Loan Approvals

Before the 2008 housing crisis, banks encouraged homeowners to take out home equity loans. These credit lines covered the costs of new cars, college tuition, and other major life expenses.

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