Is the Housing Market Crash Cancelled?

With the Fed continuing to raise interest rates, and housing market activity appearing to be health this spring, many are saying that the housing market crash that was anticipated is unlikely to occur. The probability, in my opinion, of a continued boom is housing seems to a pipe dream for many in the real estate space. Mortgage demand, measured by mortgage applications from the Mortgage Bankers Association, fell 9% from the previous week. What’s even more telling is that mortgage applications plunged 41% from the same period year-over-year.

Another source that is showing signs of a weaking market, are the total number of housing starts from residential homebuilders. The number of housing unit permits from homebuilders in December 2022 was 1.3mm, compared to 1.9mm in December 2021. This is 30% decrease year-over-year. Homebuilders are having to slash prices to offload their inventory, and are mitigating their risk by lowering their upcoming projects.

While the talking heads continue to tell us the all is dandy in the world of real estate, and that we are “getting multiple offers” on a continued basis, the data tells a different story. While this may not be good news for those that bought in the past 3 years, it is great news for first time homebuyers and those that have been priced out of the market since COVID. Depending on which side of the equation you or your business sits, it will gauge your true optimism or pessimism about what is going on.