The real estate market is a tricky thing. Everyone is making money, and life is good when it’s going well. But when things go wrong, let’s just say it can be pretty ugly.
Recently there has been a lot of talk about the housing market bubble popping and what that could mean for you as a homeowner or investor.
This article will discuss the current real estate market bubble, factors influencing the boom, and expert advice for returning and first-time buyers.
Housing Market Predictions 2022: Boom or Crash?
It’s no secret that the US housing market has been on fire for the past few years. Prices have been rising steadily, and it appears there is no end in sight.
This has led many people to believe that we are in the midst of a housing market bubble and that it is only a matter of time before it pops.
But how do we know when we are experiencing a housing bubble?
A housing bubble shows a consistent run-up in prices driven by demand that outpaces supply and is not backed by fundamentals such as income or rental costs.
So, when people buy houses because they think prices will continue to go up, rather than because they need or want to live in the house, you have a bubble. And when too many people do this, the bubble will eventually pop.
So why do people think the housing market bubble will pop soon?
There are a few reasons. First of all, we are currently in one of the longest bull markets in history, and all good things must come to an end at some point.
However, it is crucial to note that one cannot say for sure when this will happen.
Secondly, the Federal Reserve has projected to raise interest rates six more times by the end of 2022. But since inflation is expected to decline later this year, mortgage rates may not climb as swiftly as in recent months.
Lastly, there is a lot of talk about inflation these days, and if that does start to pick up, it could also lead to the housing market bubble popping.
Factors Affecting The Real Estate Market Boom
Here are the primary factors that are currently affecting the real estate market and will continue to do so in the coming years:
Millennials Searching For Their First Home
The biggest demographic of homebuyers are now the Millennials. They have waited longer than any other generation to buy their first home, and they are currently doing it now at an alarming rate.
According to a recent study by the National Association of Realtors (NAR), 43% of all buyers in 2022 were millennials, up from 37% in 2021.
This implies that the demand for housing will only go up in the coming years, which is good news for sellers but not so much for buyers.
If you’re a millennial looking to become a first-time buyer, you need to be prepared to face stiff competition and rising prices.
Recovery Resilient Despite Ongoing COVID Threat
The housing market has been one of the economy’s strongest sectors during the pandemic, with sales and prices both rising steadily since last spring.
This resilience is due to several factors, including low mortgage rates, a desire for more space amid the COVID-19 pandemic, and a limited supply of homes for sale.
While there is still an ongoing threat of the Omicron variant, the vaccine rollout provides some hope that the pandemic will eventually end.
This, combined with the fact that many people have been working remotely and may continue to do so even after the pandemic ends, means there will likely be continued strong demand for housing in the coming years.
As per the US Bureau of Economic Analysis, in the fourth quarter of 2021, real gross domestic product (GDP) rose in 47 states and the District of Columbia, with real national GDP increasing at a 6.9% annual pace.
Another crucial factor influencing the real estate market boom is the economy’s overall health. The GDP growth rate depends not just on housing alone but also on various other factors such as employment rates, corporate investments, etc.
If the economy continues to grow at a healthy pace, there will be more demand for housing, which will push the prices up even higher.
But if the economy falters or falls into a recession, there will be a lot of distress selling by homeowners who are forced to sell their properties to make ends meet.
Higher Rental Costs
Despite the rising mortgage rates and home prices, many people are weighing on the option of owning their own homes due to the high rental costs.
The average rent for an urban apartment has increased significantly in recent years, while incomes have not kept pace. This has made it difficult for many people to afford rent, especially in expensive cities.
Owning a home offers more stability than renting and the potential to build equity over time. Consequently, we expect that the high rental costs will continue to drive demand for housing in the coming years.
Advice for Sellers, Buyers, and Investors
If you are thinking about buying a house in Sacramento— one of the nation’s hottest markets, now is an excellent time to get preapproved and look for properties.
However, you should be prepared for the possibility that prices may continue to rise, and interest rates could also increase.
If you are selling your home, you may want to ensure your property is in the right shape to attract serious buyers. We also recommend working with a real estate agent to help you navigate the market and get the best possible price for your home.
For an investor, this is something to keep an eye on. There is a lot of potential for profit in the housing market right now, but there are also a lot of risks. Pay close attention to market trends and be prepared to adjust your investment strategy accordingly.
With rising interest rates and other factors like the economy, there is a possibility of the real estate market bubble popping soon. It is essential to consult with a professional to see if now is the right time for you.
If you are buying a house in Sacramento, our company offers exceptional services in real estate, and we can help you during every step of the process. Contact us today!