When is the housing market going to crash? In just one month, this foreboding question skyrocketed in Google searches, seeing more than a 2,450% increase. The current housing market is showing phenomenal momentum and has been on this forward trajectory since before the outbreak of the COVID-19 (coronavirus) pandemic in 2020.

With over a year of phenomenal and record-breaking housing sales, the general public and housing industry professionals alike are starting to wonder how long it can last. How long before the positive momentum slows down and the housing market crashes after several months of success?

In addition to an increase in Google searches for “When is the housing market going to crash?” the question of “Why is the market so hot?” also saw a surplus of searches, doubling in just one week. It is apparent home buyers and sellers are doing their research regarding the housing industry, because “How much over asking price should I offer on a home 2021” also jumped 350% in the same week.

CoreLogic recently reported home prices were up 10.4% in February 2021 when compared year-over-year. This is the largest reported annual jump in median home price since 2006. In addition to the steep increase in home prices, there is a critical shortage of housing inventory.

According to Realtor.com, there are currently around 50% fewer homes for sale than when compared with the same time last year. Because of the low inventory of homes, buyers are entering into bidding wars and potentially paying more for the same product they would have spent significantly less on in 2020.

While the housing market is booming and sellers are experiencing high return on investments, experts are starting to wonder if we are nearing the peak in its long-winded growth. Sellers’ recorded asking prices are starting to level out while the average number of mortgage purchase applications are declining. As this number continues to decline, it is an indicator that more and more buyers are dropping out of the market due to affordability.

Another steady decline noted in 2021 during January and February is the number of new homes entering the market. While home builders are slowly pushing production into the market, various outside factors prevent a bigger drive, including high lumber costs. Because of the inventory shortage and interest rates on the rise, keeping an eye on affordability metrics throughout the remainder of 2021 is important.

But does all of this mean the housing market is in for a catastrophic crash to rival the one of 2008? Experts are still saying no! However, there are strong indicators that the myriad of successes in the housing industry over the past year are due for some serious cooling off.

A mix of home builders’ continuation to provide inventory, government stimulus action and improved mortgage underwriting should help the housing industry stay afloat, even with a downturn in momentum. So for now, the answer to the highly-popular Google search question, “When is the Housing Market Going to Crash?” is probably not any time soon!

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