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HW+ housing crash

Home prices are skyrocketing, housing inventory is at all-time lows and homebuyers have to contend with multiple bids. Can this last? No, it can’t. In time, markets always find balance and balance is a good thing. But, that doesn’t mean housing is going to crash.

One of the reasons that I moved into the “team higher mortgage rate” camp is that what I saw in January, February, and March of this year was so unhealthy that I labeled the housing market savagely unhealthy.

I set a specific home-price growth model for the years 2020-2024 that said if home prices only grew at 23% during this five-year period, the housing market would still be OK, given wage growth. Obviously, my home-price growth model got smashed! With where prices were heading when mortgage rates were under 4%, we were looking at 35%-40% cumulative home-price growth in just three years.

That isn’t a good thing, so I want to see a cool down in prices. However, a cool-down in prices is not the same thing as a housing crash. Let’s take a look at what it would take to crash homes prices in America.