53% of Prospective Home Buyers Think the Housing Market Will Crash. Are They Right?

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  • Home prices have been elevated for several years, and gains have been slowing.
  • While some people might think the housing market is about to crash, that's unlikely to happen for one big reason.
  • The market is still lacking inventory, meaning prices will likely remain elevated.

A crash might benefit buyers -- but is that really likely to happen?

It's pretty fair to say that the start of 2023 is not the ideal time to be buying a home. Although home price gains have been slowing down, housing prices are still elevated on a national level. In fact, as of December, home prices were still up almost 7% on an annual basis, according to CoreLogic.

Not only is housing still expensive, but mortgage rates are high, too. So all told, today's buyers face big challenges with affordability.

And then there's inventory -- a factor we can't forget about. As of late December, there was only a 2.9-month supply of available homes for sale on the market, according to the National Association of Realtors. It normally takes at least a 4-month supply of homes for sale to meet buyer demand. And any time you have a commodity in short supply, its price tends to rise and stay elevated until supply is able to catch up to demand.

Meanwhile, a good 53% of prospective home buyers today are hesitant to purchase a home due to fears that the real estate market will crash, according to a recent survey by Cinch Home Services. But are they right to think that the market is about to take a dive? Well, maybe not.

Why a near-term housing market crash is unlikely

When the value of any given commodity plunges, it's usually due to there being way too much supply and not nearly enough demand. That's not what today's housing market looks like, though.

Rather, today's market lacks inventory, and that alone has been keeping prices up. And because there's such an extreme lack of inventory, we're unlikely to encounter a scenario anytime soon where the demand to buy homes exceeds the supply of those available. Because of this, we shouldn't expect a real estate market crash in 2023.

This isn't to say that the housing market won't ever take a dive. But let's think back on the past year. Home prices managed to show gains throughout 2022 even as it got more expensive to borrow via a mortgage loan. And if soaring mortgage rates didn't cause a steep decline in buyer demand last year, then it's reasonable to assume that buyer demand will hold steady this year, too.

Should you hold off on buying a home?

You may want to wait on purchasing a home because property values are still high and mortgage rates are still elevated. But you shouldn't necessarily delay a home purchase due to fears about a near-term housing market crash if you're financially and mentally ready.

Nobody wants to buy a home only to see its value fall. But if you buy a home you can comfortably afford, then near-term changes in its value shouldn't really matter to you all that much.

Remember, you're not buying a home to get rich quickly -- or at least you shouldn't be. You're buying a home so you have a place to live. And if you can afford that right now, then you shouldn't necessarily let fears of a real estate crash get in your way.

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