5 Big Reasons to Fear Housing Market Prices Will Fall


In many areas of the US, the housing bubble has shown little signs of deflating. However, one analyst believes it is unlikely to be a successful season and housing market prices have to fall.


Founder and chief economist of Pantheon Macroeconomics, Ian Shepherdson, predicts that sales may start to fall significantly and we’ll maybe see a housing market crash.


According to his research note, existing-home sales are likely to decrease by roughly 25% from their February annual rate of 6.02 million to 4.5 million by summer’s end.


Shepherdson pointed to mortgage demand as evidence of this slowdown. Recent Mortgage Bankers Association data indicates a decline of more than 8% in home loan applications.

Reasons to Fear a Fall in Housing Market Prices

1) The Decline in Bank Lending

As a result of low liquidity, banks cut back on lending during the 2009 recession. Homeowners wanted low-interest-rate mortgages, but banks kept tightening lending criteria, making it harder to get a mortgage.

A healthy economy and low unemployment tend to increase home prices;  Homebuyers are more confident about their jobs and are more prepared to take on mortgage debt.

2) Fluctuating Demand And Supply

Just as with goods and services, supply and demand influence home prices. There are buyers and sellers in every housing transaction, so a fluctuating supply of homes will affect prices.

Bidding wars are common during this time. In contrast, a buyer’s market occurs when the housing market prices are weak and the supply is plentiful.

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