The Question That Comes Up Constantly and the Honest Answer

Should I just wait for the housing market to crash? It is one of the most common questions buyers ask right now and the honest answer requires a clear-eyed look at what the current market actually looks like versus the 2008 environment that most people are picturing when they ask it.

Why Today's Market Is Fundamentally Different From 2008

The 2008 housing crisis was driven by a specific set of conditions that do not describe the current market. Loose lending standards that put millions of buyers into mortgages they could not sustain. An inventory of homes built on speculative demand that evaporated when financing dried up. Homeowners who had little to no equity because prices had been inflated by easy credit. When those foundations collapsed the market had nothing to support it.

The current market looks very different on every one of those dimensions.

Homeowners today have substantial equity built through years of appreciation and principal paydown. Foreclosure rates remain low. Lending standards have been significantly tighter since the qualified mortgage rules went into effect after 2008. And the fundamental supply problem driving prices is a genuine shortage of homes in many markets rather than speculative overbuilding. These are structural differences that matter when evaluating the probability of a 2008-style correction repeating.

What Could Actually Happen

As Matt Brady explains prices could level off in some markets. In areas where appreciation has run significantly ahead of income growth or where specific economic pressures are creating localized stress some softening is possible and has already happened in isolated markets.

What is not being projected by most economists is the kind of broad, severe, sustained price decline that would make waiting for a crash the winning strategy. The conditions that produced 2008 are not present in the same way and the structural shortage of housing supply in many markets creates ongoing demand pressure that did not exist in the run-up to the last crisis.

The Real Cost of Waiting for Something That May Not Come

Waiting for a massive crash that may never arrive has a compounding cost that buyers tend to underestimate when they make the decision to wait.

Every month of waiting is a month of equity not building. Every month of appreciation that happens without ownership is wealth accumulating for someone else. If prices level off rather than crash buyers who waited have not captured the benefit they were hoping for while absorbing the real cost of continued renting during the waiting period.

And if rates improve during the waiting period demand returns with them. More buyers competing for the same limited inventory pushes prices back up and the negotiating leverage that exists in a quieter market disappears exactly when the buyers who have been waiting finally decide to act.

What the Smartest Move Actually Is

Trying to perfectly time the market is not a reliable strategy for most buyers. The smartest move is buying when you are financially ready and finding the right strategy for your specific situation given what the current market actually offers.

Matt Brady works with buyers to evaluate their specific financial readiness and to build a purchasing strategy that makes sense for where the market is rather than where buyers hope it will be. Reach out to Matt Brady to find out what the right move looks like for your situation right now.

Sources

NAR.realtor
MortgageNewsDaily.com
FederalReserve.gov
ConsumerFinancialProtectionBureau.gov
Investopedia.com