Your Home Sold Guaranteed Realty — The Nathan Clark Team

5 Warning Signs of a Housing Market Crash

Learn The Most Common Signs of a Housing Market Crash

Wondering what the warning signs of a housing market crash are? As interest rates continue to rise, many home buyers, sellers, and realtors are nervous about whether the real estate market is headed toward a repeat of the 2008 crash.

While we’re currently experiencing some of the same conditions that occurred in the run-up to the housing bubble burst in 2008, most experts seem to agree that that won’t happen this time. Nonetheless, you may want to know the signs of a housing market crash so you can make more informed decisions and prepare yourself if one should occur. 

In this post, our team at Your Home Sold Guaranteed Realty – The Nathan Clark Team will discuss five warning signs of a housing market crash. We’ll also discuss why our real estate team should be your first choice for buying or selling a home during a difficult market.

1. Sudden Decrease in Demand

Supply and demand are driving forces of the housing market. An increase in demand and short supply often causes a housing bubble– whether on a local, state, or national level.

That’s why one of the first signs of a housing market crash is a sudden decrease in demand accompanied by the same or a higher supply level. When demand drops but supply continues to rise, it causes home prices to fall. 

2. Increase in Interest Rates

So, what causes the demand for housing to drop? One of the most common reasons is an increase in interest rates– something the housing market is currently experiencing.

When interest rates rise, it makes it harder for home buyers to afford a mortgage. As a result, many people who otherwise would have entered the housing market are suddenly unable to.

Higher interest rates can also affect current homeowners who don’t have a fixed-rate mortgage. This can leave them unable to afford their mortgage payments or the option to refinance. 

Ultimately, this can lead to homeowners defaulting on their payments and an increase in foreclosures, which ends up adding more homes to the supply.

3. Excessive Investor and Buyer Risks

Another one of the most common signs of a housing market crash is investors and home buyers taking too many risks in the market right before it crashes.

These people notice that home prices are high and make risky decisions based on those unrealistic prices and the expectation that they’ll keep rising. 

For home buyers, this means they may purchase a home that’s too expensive or take out a mortgage they can’t afford. For investors, they may snatch up properties and flip them with the hopes of making a profit, only to realize the demand is no longer there once the market cools off.

However, it’s important to note that high prices on their own don’t necessarily indicate an impending crash. It’s only when these prices reach a level of instability that they become dangerous.

4. Tough Economic Conditions

High inflation, unemployment, or a recession aren’t necessarily signs that the market will crash, but they can be contributing factors. The economy’s health is closely tied to the housing market, so these conditions can worsen the situation for home buyers and sellers looking to enter the market.

For example, inflation may lead to rising interest rates, which leaves many home buyers unable to enter the market. This is what the real estate market is experiencing at the moment, with inflation at 8.2% and interest rates at 7.2% as of late 2022. 

5. Local Market Conditions

As mentioned above, housing market crashes can occur on a local, state, or national scale. That’s why other signs of a crash include the local market conditions in the area.  

So if a certain city or neighborhood starts experiencing increased cost of living, crime, unemployment, or other undesirable conditions, it can lead to migration out of the area. As demand suddenly falls, it causes prices to decrease and investors to pull out of the market.

We Can Help You Buy or Sell a Home in New England During a Tough Market

Many of these signs of a housing market crash are closely related. Even so, they aren’t necessarily a guarantee that a crash will occur. That’s why the best way to prepare yourself before entering the current real estate market is by working closely with a professional realtor. 

Only realtors have extensive, individualized knowledge of your particular housing market, which gives them a greater ability to make the right decisions about buying or selling your home.

If you’re looking to buy or sell a home in New England, our real estate team at Your Home Sold Guaranteed Realty – The Nathan Clark Team can help you out.

We’re known as the best real estate team across Rhode Island, Connecticut, and Massachusetts for a reason. Not only do we have an extensive library of free real estate resources, but we also have unique buyer’s and seller’s guarantees.

For home sellers, this includes our Guaranteed Home Sale Program. For home buyers, this includes our Buyer Protection Plan and Buyer Cancellation Guarantee.

These guarantees truly make us stand out from other realtors in the area. We go so far as to guarantee the successful sale or purchase of a home, despite difficult market conditions. 

To learn more about our guarantees or about buying or selling a home in New England with us, give us a call at 401-288-3557 or fill out the form below.

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