Is Another Housing Crash Looming? Expert Says No

Although the housing market bubble burst over a decade ago, it is still fresh in the minds of many Americans. Given current high price growth and slowing sales, anyone with a stake in housing can't help but worry if another correction is on the horizon. Luckily, in a new article written by National Association of Realtors chief economist Lawrence Yun, he argues that the underlying market conditions in 2018 are fundamentally different than those that existed prior to the last crash. Keep reading to learn why he believes that "the likelihood of a nationwide home price collapse is near nil for the foreseeable future."

First, what are the reasons for the current market anxiety? Perhaps the largest contributing factor is the ongoing downturn in existing-home sales, which have fallen 2.2% behind last year's pace through June. In the same time period, existing-home prices have risen over 5%, causing problems with affordability in many of the nation's major housing markets. These issues together create the specter of a bubble getting ready to burst. However, there are several important details that make this fear unfounded.

The key element which pops possible bubble concerns is the fact that the current slowdown in sales is not due to weakening demand, but instead is being caused by lack of supply. Dr. Yun points out that inventory levels have fallen in 8 of the last 10 years, including consecutively in each of the last 3. Whereas a typical housing market would have enough supply for 6-7 months of sales, current inventory stands at just 4.3 months at the current sales pace. Further proving that demand is still present is the average time spent on the market for sold homes, which in June matched the shortest in a generation at only 26 days. The intense competition for the homes that are up for sale is driving prices higher, suppressing total sales by reducing affordability for millennials looking to enter the market across the country.

You might be wondering if such demand is healthy; after all, plenty of people who couldn't really afford to do so were buying homes in the years leading up to the last crash. To this, Yun points to the much stricter lending requirements in place today. Before the mortgage crisis, subprime loans were the norm, meaning that there was much greater financial risk involved both for the buyers and for the market as a whole. Today, the average credit score of a home buyer is much higher than it was in 2006, especially among the lowest income buyers.

Still aren't convinced? Read Dr. Yun's full article on to see all the evidence for why another housing crash is nowhere on the horizon!