The real estate market continues its rollercoaster ride, and many are left wondering about the possibility of the next housing market crash. In a recent video, real estate expert Graham Stephan explores the housing market’s current state, delving into key factors that could impact its future. Let’s break down the highlights and examine what lies ahead.

The Frozen Market of 2023’s year-end review describes the housing market in 2023 as “Frozen,” hinting at a standstill due to rising interest rates. Despite a surge in home prices, a peculiar scenario unfolds, with existing home sales set to hit their lowest since 1995 and pending home sales at an unprecedented low since 2001.

One of the key indicators of a potential market downturn is the alarming decline in affordability. Stephan highlights that 38.6% of the median household income is now required to make monthly payments on the average home purchase, pushing 99% of the United States into the unaffordable zone for those earning $71,000 a year.

Stephan raises concerns about potential economic challenges, pointing to historical data that suggests periods of low unemployment often precede recessions. While current unemployment rates are touted as historically low at 3.7%, Stephan argues that patterns from the past indicate a cycle that could impact housing affordability. Additionally, a survey reveals a staggering 84% of respondents believe it’s a bad time to buy a home, attributing this sentiment to high mortgage rates.

An interesting bit of insight can be found in the comments: “I bought my last home in 2006 for 196k.  At the time I was told “Don’t worry, you can refinance in a few years with better loans”.  By 2012 it was worth 60k.  I paid on it for 16 years before selling it for what I owed (had to sell when I moved cause rent wasn’t even 50% of the mortgage payment).  I was upside down on my home for 14 years straight.  Refinancing was never possible.  It is absolutely possible to buy at the wrong time and have it take decades to financially recover.

Side note, there is no shortage of homes.  Only shortage of homes for sale.  There are currently 15 million vacant homes in the US.“

Factors Predicting a Housing Crash in 2024

  1. Affordability Crisis: Nationwide, there is a worrisome lack of affordability, signaling a potential market correction.
  2. Unemployment and Historical Patterns: Examining historical data, Stephan highlights how economic downturns have historically followed periods of low unemployment.
  3. Recession Concerns: Chief economists at express concerns that a recession in 2024 could weaken housing demand.

Contrary Predictions and What They Mean for Buyers

Despite these red flags, several predictions paint a different picture:

  1. Falling Interest Rates: Anticipated interest rate cuts could drive more buyers into the market, potentially causing prices to rise further.
  2. More Sellers in 2024: The expectation of lower interest rates may entice sellers, potentially leading to increased inventory and stabilizing the supply-demand balance.
  3. No Clear Indication of a Recession: The economy’s overall health, with strong GDP and robust consumer spending, provides a more optimistic outlook.
  4. Seasonal Trends: Recognizing consistent seasonal price swings, Stephan suggests that the market may slow down temporarily, presenting potential opportunities for negotiation.

Advice For Getting Through the Uncertainty

In the face of potential market shifts, Stephan offers valuable advice for homeowners and prospective buyers:

  1. Opt for a 30-Year Mortgage: Emphasizing flexibility, Stephan recommends a 30-year mortgage, allowing homeowners to adjust payments as needed.
  2. Choose a Fixed Interest Rate: In uncertain economic times, locking in a fixed interest rate provides stability and peace of mind.
  3. Consider Refinancing: Seizing opportunities to refinance when rates drop can result in significant savings.
  4. Hold onto Your Property: Selling should be avoided unless absolutely necessary, as real estate values primarily matter when selling.
  5. Maintain an Emergency Fund: Unforeseen costs are inevitable in real estate ownership, necessitating a well-prepared emergency fund.
  6. Buy Within Your Means: Avoid overextending financially; prioritize purchasing a property that aligns with your financial comfort zone.

The Resilience of Real Estate

Acknowledging the market’s historical resilience, Stephan encourages a long-term perspective. While short-term fluctuations may occur, real estate has proven to be a stable store of value. Buyers and homeowners can navigate the uncertainty by adopting a strategic approach and positioning themselves for long-term success.

In a market filled with uncertainties, Stephan’s insights serve as a compass for those seeking to make informed decisions about real estate. 

What do you think? Is the current freeze in the housing market just the calm before the storm, as Graham Stephan suggests, or are there unseen factors that could lead to a surprising surge in the real estate sector?

As affordability plummets and unemployment rates fluctuate, do you believe the traditional real estate market patterns will hold, or are we entering uncharted territory with unpredictable outcomes?

In the face of potential economic downturns, is the advice to secure a 30-year mortgage a strategic move for flexibility, or could shorter-term options provide a more stable foundation?

How do you weigh the benefits of falling interest rates against the risks associated with a recession, and do you agree with Graham Stephan’s assessment that a recession in 2024 could alter the housing market landscape? There is a lot to process here, that’s for sure.

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