Is the Real Estate Market about to Crash? | Why Market Correction is Likely to Happen in 2022

It’s totally understandable that buyers and sellers are freaking out about a possible housing bubble, comparing 2022 to what happened in 2008.

I read an article recently on Business Insider that I agree with. I personally believe we are heading towards a market correction more than a market crash.

As the federal reserve’s decision to raise interest rates from a near-zero level goes up to a super high 12-year high, it puts additional pressure on housing costs. With housing affordability sitting at a decade low, the home buying frenzy that rocked the real estate market is now beginning to fizzle a little bit.

Why Real Estate Market Crashed in 2008

The movie “The Big Short” outlines why the real estate market crashed in 2008. It was a combination of cheap debt, predatory lending practices and complex financial engineering that resulted in many borrowers being placed into mortgages that they could not even afford. This resulted in a foreclosure crisis.

Real Estate Market Condition in 2022

In 2022 the real estate market is in a much better position. Almost all the American households have rebuilt their nominal net worth to pre-recession values, and lending standards have tightened so much, while home values have significantly increased.

However, despite the market’s improvement, there remains a great imbalance between supply and demand. So as buyers demand declines due to the rising costs, it is also decreasing the competition. And that could mean a correction rather than a crash is on the way.

If you want to talk more about buying or selling a property in this correcting market, contact me today.