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Will the Housing Market Crash in 2022?

The housing market is red-hot in 2022 (especially in Seattle) for a variety of reasons. One major contributor is the coronavirus pandemic that emerged in early 2020. 

Although buying and selling screeched to a halt for a short time, government stimulus packages, lower expenses due to stay-at-home orders and historically low mortgage rates made home buying more affordable than ever. 

Once we settled into somewhat of a “new normal,” potential homebuyers reemerged with enthusiasm, even with record-low inventory. In turn, this imbalance shot home prices through the roof, where they remain. So will the housing market crash in 2022? We’ll discuss the possibility.

[Related: Predictions for the 2022 Seattle Real Estate Market]

Current Housing Market

Although demand has slowed, inventory versus interest is still drastically uneven. Many homebuyers who planned to purchase a home after the pandemic have already done so. Also, the Federal Reserve has raised benchmark interest rates in its most aggressive hike since 1994

This may present a few red flags pointing to a housing market crash, but many housing experts believe it simply might signal a return to a more normal (balanced) housing market.

The Housing Market Is in Better Shape Than in 2008

Many experts are returning to one main point — the housing market is still currently in better shape than it was during the crash of the 2007-2008 financial crisis. 

The housing market plummeted so dramatically back then largely because of unregulated mortgage lending and delinquent borrowers that led to foreclosures. The forced selling that occured due to foreclosures and bank repossessions torpedoed homes’ equity and significantly contributed to the massive crash. 

[Related: The 8 Best House Hunting Apps]

In 2022, mortgage lending regulations are much stricter to lower that risk, and home equity is in much better shape all around.

JP Morgan also reports that the signs of debt growth are not as high as they were in 2006, right before the financial crisis: 

“On the whole, the U.S. housing market still looks considerably less risky than it did in the mid-2000s. While there are some pockets of rapid price growth and extremely high price levels, in addition to a few places with fairly high prices despite growing supply, there is nowhere that has combined these price patterns with rapid debt growth, as occurred in some places in the mid-2000s.”

Low Inventory and High Demand

The housing market is unlikely to crash in 2022, in part because of the continued lack of inventory and the high demand for home purchases.

Although there has already been a slight increase in housing supply — and experts predict more homes showing up on the market later in the year — inventory continues to stay at very low numbers compared to historical trends. 

This, paired with the number of millennial homebuyers entering the market for the first time in 2021 and 2022, gives the housing market foundation some much-needed support. Millennials make up the largest share of homebuyers at 43%.

[Related: How to Avoid Being “House Poor”]

No Predicted Crash

All in all, experts conclude that no predicted crash is on the horizon. The current housing market is in overall better shape than it was during the financial crisis 15 years ago. Alongside the supply-and-demand imbalance, as well as other population demographics (such as the increase of millennial homebuyers), factors that would indicate a housing crash simply aren’t present.

[Related: Why Real Estate Is the Best Long-Term Investment]

Contact Seattle Mortgage Planners Today!

If you’re ready to take your first steps toward homeownership or are thinking of relocating to Seattle, we can help. At Seattle Mortgage Planners, we’re experts at assisting new and experienced homeowners in finding the right rates, researching great neighborhoods, going through the loan process and deciding on the best financing options

Send us a message or give us a call at (206) 799-9966 for a consultation. Help us get you one step closer to owning your dream home.

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