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.

Several reasons contribute to these bubbles, including increasing economic prosperity, more mortgage product offers, low-interest rates, and easy credit availability.

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). It might lead to a sharp decline in housing market prices.

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. However, the Federal Reserve’s goal to control inflation may slow housing construction.

2. Inventory Picks Up

The cause of the present housing crisis in the United States is supply and demand. 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.



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When the United States began putting lockdown in place because of the pandemic in 2020, the initial assumption was that doing so would discourage individuals from buying homes. Instead, the reverse happened. As millennial buyers took advantage of record-low borrowing rates to purchase houses, the housing market exploded.

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. Furthermore, 17% of those surveyed are anxious about losing their jobs.

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