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.
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.
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.
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.
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.
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.
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.