There’s been talk of a housing market crash since the onset of the pandemic.

Are signs of a crash finally starting to appear or is the housing market actually starting to bounce back?

In this blog post, I’ll share the latest market data with you and tell you which big financial institution recently updated their housing market outlook for 2023.

Watch the following video, or continue reading below, to learn more;

Housing Market Crash

At the onset of the pandemic, there was no shortage of predictions about a housing market crash. They said housing was going to collapse worse than in 2008 due to the widespread economic shutdown.

It didn’t. The housing market went in the opposite direction and soared.

Then, as prices rose rapidly, many believed the housing market must be in a bubble, that would lead to a crash.

There’s been so much talk of a housing market crash over the past few years that a recent survey by NerdWallet found the majority of Americans believe one is imminent;

Fact or Fiction

Are those beliefs justified or just a case of buying into the hype?

If the past few years have taught us anything, it’s that the future is impossible to predict.

While I certainly don’t know what the future will bring, what I do know is two things need to happen to bring about a housing market crash;

Supply needs to increase while demand decreases. And there lies the problem.

Talk of a housing market crash accelerated again last year in the face of rapidly rising mortgage rates. As mortgage rates more than doubled the expectation was that buyer demand would evaporate, which it did to a certain extent, but the corresponding rise in supply never happened.

Rather than supply rising, those sellers that didn’t have to sell, simply took their homes off the market and decided to stay put. The sellers that really needed to sell were forced to cut prices which resulted in the price declines we saw in Frisco and Prosper last summer.

By September, when mortgage rates peaked, supply in the resale market had grown tight again while the new homebuilders introduced incentives to move homes already in the pipeline.

Once potential home buyers had absorbed the shock of higher mortgage rates, those buyers started returning to the market as mortgage rates fell.

Mortgage News Daily recently released a graph showing the impact of mortgage rates on buyer demand;

Here in our local market, when mortgage rates went above 7% we saw very little buyer activity, but as rates came down we definitely saw activity pick up.

Lately, rates have been between 6% and 6.5% and we have seen good buyer activity overall.

One of the new homebuilder incentives I mentioned above was reduced mortgage rates. Using mortgage rate buy downs, the builders were able to offer buyers financing below 5%, which resulted in very strong buyer demand and allowed the majority of our local builders to experience record sales in December.

While there is still a widespread belief the housing market is teetering on the edge of a cliff, the data says otherwise.

Mike Simenson, CEO of Altos Research, a widely respected real estate data analyzer, recently said the following;

Altos Research power the market reports I make available each week and is a great way of tracking what’s happening here in our local market.

The snippet below is from my latest market report for Frisco. The Market Action Index is a quick and easy way to see if our market is heating up or cooling down. Think of it like a speedometer that goes from 0 to 100.

Last month we had a reading of 41 and this month we are at 48, indicating the market is heating up. Last year at this time we had a reading of 100, so while the market is heating up it remains a long way from the frenzy we experienced last year.

If you click on this snippet you will be taken to the full Frisco report. From that report you can alternatively see the latest data for any city/zip code of interest to you;

Experts Starting to Revise Forecasts

As Mike Simensen mentioned above, the housing market has shown more resilience and strength than many expected. As such, many leading financial institutions are starting to revise their forecasts related to price growth in 2023.

Here is the updated Goldman Sachs forecast (keep in mind this is national)

What I find interesting is the fact these forecasts were made only two weeks apart. Goldman Sachs went from forecasting a 6.1% national price decline on January 10th to a 2.6% price decline just two weeks later on the 24th.

Our market here in North Texas, especially the Frisco and Prosper area, is very different than that national market overall.

Home prices have been holding steady since last September and sales activity is brisk. Many new home communities I have visited recently have very few homes for sale that will be ready for move-in within 4 months and some are starting to raise prices based on demand for future homes.

Overall, I expect home prices locally will remain fairly flat or see modest gains in 2023, but I have seen forecasts projecting up to 6.3% price appreciation this year.

If you have additional questions about the local market, or a specific situation you would like to discuss in more detail, please Schedule a Call with me.