- Rising mortgage rates have some experts worried about a potential housing market crash.
- That's not a personal concern for me, and I also don't see home values plunging anytime soon.
- If you don't have any urgent plans to sell your home or use your home's equity, you should feel confident, too.
It's not a concern for a number of reasons, some of which are specific to me, and some of which apply across the board.
If you're in the market for a home or simply like to keep tabs on housing news, you may be aware that mortgage rates are much higher these days than they were a year ago, or even at the start of the current year. That, combined with warnings of an impending recession, has some experts worried about a housing market crash.
The logic is that if borrowing gets too expensive, buyers will start to pull out of the market. Once that happens and demand wanes, home prices could start to plunge.
But I'm not stressing over a potential housing market crash. Here's why.
1. I don't see one happening
For home values to plummet, we need a situation where the supply of available properties greatly exceeds the demand for them. But these days, housing inventory is very low, as it has been for well over a year.
As such, it's unlikely that we'll see a near-term disconnect between supply and demand, even with mortgage rates being on the rise and potentially pushing buyers away. If anything, what I can see happening is that home prices gradually drop to more moderate levels -- a very different scenario than a full-blown crash.
2. I have no plans to sell
If you're making plans to sell your home within the next year or so, then you may want to list your property now, while buyer demand is still very strong and home prices are up. I, on the other hand, have no intention of selling my house anytime soon.
For one thing, I wouldn't want to have to move my kids out of the neighborhood they know and love. Secondly, moving would likely mean ending up in a new school district. That's something I don't think my kids would appreciate.
Plus, I'm not motivated to sell right now because while I might command a generous price for my home, what I gain by selling, I'll lose by overpaying for a replacement home. And since I'm not looking to sell my home, I don't really have to worry about its value dropping.
3. I'm not looking to tap my home equity
Right now, U.S. property owners are sitting on record levels of home equity thanks to sky-high home values. If housing market conditions decline, home equity levels are apt to drop, leaving homeowners with less borrowing power.
But I don't care so much about home equity because I have no plans to borrow against mine. I make a point to keep a lot of money in my savings account for emergency expenses, so if an unplanned bill were to hit, the bank would be my go-to source for money -- not a home equity loan or line of credit (HELOC). As such, a drop in home values probably wouldn't limit my options when it comes to paying for expenses.
It's easy to see why some people may be worried about a housing market crash. But I'm not concerned about that happening. If you're worried, though, and you're planning to sell your home, you may want to act quickly on getting that listing up. Similarly, you may want to get your home equity loan or HELOC application in sooner rather than later if you're planning to tap your home equity. But otherwise, a housing market crash isn't something worth losing sleep over -- not when it's fairly unlikely to happen anytime soon.
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