Alarming headlines and predictions that are constantly changing can make the 2024 housing market challenging to navigate. So if you’re thinking about buying a home, who can you trust to provide accurate information? As a mortgage professional with over 3 decades of experience, here’s the truth about 2 myths circulating in today’s housing market.
Myth 1: Wait for the Market to Crash and You’ll Get a Better Deal
Truth: The housing market of today is very different from the conditions that led to the 2008 crash. While concerns about high home prices and affordability persist, key factors point to a more stable foundation. One reason is the historically low inventory of homes on the market, which is shielding the market from a 2008-style collapse.
In 2008, the housing bubble burst due to risky lending practices, subprime mortgages, and excessive speculative buying. These factors led to a massive surge in foreclosures, flooding the market with inventory. Supply far exceeded demand, causing prices to plummet and sparking a broader financial crisis.
Today, the situation is quite different. Lending standards are much stricter and there is a significant shortage of homes available for sale.
This low inventory acts as a buffer against a crash. Even though higher mortgage rates are cooling demand, the persistent shortage of homes keeps prices from dropping at an abrupt or abnormal rate. Without the oversupply that contributed to the 2008 crash, experts believe that a similar downturn is unlikely today.
Myth 2: Whenever Rates Rise, the Home Prices Will Drop
Truth: It’s a common belief that high interest rates lead directly to falling home prices, but the reality is more complex. While higher interest rates do cool demand by increasing the cost of borrowing, they don’t automatically trigger a steep drop in home prices. Another factor influencing home prices is inventory levels, which tend to play a much larger role than interest rates alone.
When interest rates rise, the cost of financing a home becomes more expensive, which can reduce the pool of potential buyers and slow the pace of sales. This often leads to a moderation in price growth or even price declines in some markets. However, home prices typically do not plummet unless there is a significant increase in housing supply.
Inventory levels—how many homes are available for sale—are a crucial determinant of price trends. In a market with tight inventory, even higher interest rates may not lead to price drops. When the number of homes on the market is limited, competition among buyers remains high, which helps keep prices stable.
About Michigan Mortgage Lender, Julie Krumholz from Superior National Bank
With over 35 years of experience in the mortgage industry, Julie Krumholz from Superior National Bank is a trusted resource and friend to homebuyers. Julie has worked in processing, closing, loan origination, underwriting, and QC auditing and has even co-owned a mortgage brokerage firm. Julie applies her knowledge to help first-time and seasoned homebuyers with a seamless homebuying experience.
