\n\n\n\n\n Tell us a little bit about your property and get a preliminary estimate of value in as little as two minutes.<\/p>\n \n When the price of homes plateaus after growing consistently year-over-year, it could serve as a warning sign of a housing market crash.<\/p>\n Land is an appreciating asset<\/a> because there\u2019s only so much of it (and not all land is buildable). The price of homes (including the land) usually increases by about 3% to 5% per year<\/a>.<\/p>\n When home prices level out or plateau, it affects home appreciation as well as the real estate sales market. Sometimes when enough sellers are unable to find a buyer for their homes, they will lower the price in order to attract more buyers.<\/p>\n If you are unsure about how prices have changed on a national level over time, the Case-Shiller home price index<\/a> is available on the St Louis Federal Reserve website and shows the change in home prices since 1987.<\/p>\n Another sign that a housing crash may be imminent is when we start to see lower credit standards and riskier mortgages expanding in the market. If lenders loosen up underwriting standards too much, these higher-risk mortgages can trigger a housing crash because they could be offered in bulk to buyers who can\u2019t actually afford the homes, or for home sales where the properties are priced higher than their market value.<\/p>\n Prior to 2007 and 2008, many lenders handed out subprime loans and limited documentation loans to risky applicants<\/a>, which ended up fueling the Great Recession. The Dodd-Frank Wall Street Reform and Consumer Protection Act<\/a> established more mortgage regulation and ended many of these high-risk practices that led to the housing bubble. Lenders had to increase lending standards, some of which included the requirement for increased verification and documentation requirements for the borrower\u2019s ability to afford the home, higher credit scores, or larger down payments.<\/p>\n On the flip side, when lenders start loosening up those standards to accommodate too many higher-risk borrowers, it could lead to a situation that triggers a housing bubble (i.e. artificially inflated home values) followed by a housing market crash. This is why it\u2019s important to educate yourself about lending requirements, especially higher-risk mortgage loans.<\/p>\n We used to hear that the standard down payment on a home was 20%. However, many buyers are unable to put down that large an amount. Mortgage insurance (or private mortgage insurance<\/a> for conventional loans) is required for borrowers who are considered riskier because they do not have a 20% down payment<\/a>.<\/p>\n When homeowners who lack large savings purchase a home, they can potentially experience a higher amount of outstanding debt than what the home itself is worth, leaving them with negative equity. This is especially risky when homes are being overvalued, which is what happened back in 2008.<\/p>\n An ongoing trend of rising interest rates<\/a> can also be an indication that the housing market is about to crash. Lenders compete with one another, using current interest rates<\/a> to attract buyers, among other factors. Since they utilize similar metrics to calculate interest rates, lenders\u2019 rates will often correspond with one another.<\/p>\n When mortgage interest rates go up, buyers suddenly can\u2019t afford to pay as much for the house itself, which means sellers might have to lower their prices in turn. If you understand how interest rates work on a mortgage<\/a>, you will be better able to expect what\u2019s coming next.<\/p>\n \n\n\n\n\n We analyze millions of home sales to find real estate agents that sell homes faster and for more money. It takes just two minutes to match you with your personalized recommendations.<\/p>\n \n Brad Page<\/a>, who works with 82% more single-family homes than the average agent in Savannah, Georgia<\/a>, believes that \u201cone of the biggest [signs of a crash] is inventory.\u201d<\/p>\n The monthly \u201csupply\u201d of houses<\/a> calculates how long it would take for all the homes currently listed on the market to sell at the current rate of demand.<\/p>\n In a healthy or balanced market, the supply is about six months. If the months of supply<\/a> are fewer than six months, it means that it\u2019s probably a seller\u2019s market. In a buyer\u2019s market, you will see more than six months worth of supply.\u00a0 It\u2019s a simple matter of supply and demand<\/a>.<\/p>\n If the supply of properties on the market is increasing, but the demand is not, that\u2019s a significant sign that there are more sellers than buyers and the market is about to shift.<\/p>\n One of the weird things about the economy is that it\u2019s a self-fulfilling prophecy \u2014 if people think that the housing economy is not going well, there\u2019s a good chance that the housing market could tank. General consumer sentiment is quite indicative as to whether or not it\u2019s a good time to buy or a good time to sell.<\/p>\n You can stay up-to-date on how consumers are feeling about housing by checking in with Fannie Mae\u2019s monthly consumer sentiment survey<\/a>, which asks consumers if they think it is a good time to buy or sell a house, and why. When consumers feel confident about the future, they are likely to buy more, which boosts the economy.<\/p>\n To gauge whether it\u2019s a good time to buy, take a look at consumer \u201cmood swings\u201d over the course of four or five months. During a housing market crash, consumers are likely to think it\u2019s a bad time to sell but a good time to buy because homes will be undervalued. When the housing market is booming, consumers are more likely to say that it\u2019s a good time to sell and are also more likely to be ambivalent about whether it\u2019s a good time to buy.<\/p>\n Most of us need a mortgage to buy a house, so if lenders aren\u2019t feeling optimistic about the housing market, that\u2019s also a good sign that it could be headed for trouble.<\/p>\n You can stay up-to-date with how lenders are feeling, what they are currently doing, and the nature of their market expectations by checking in with Fannie Mae\u2019s quarterly lender sentiment survey<\/a>, which tracks lenders\u2019 expectations about their profit margins, mortgage loan demand, and mortgage refinance demand.<\/p>\n The survey highlights at the end can be most illuminating, although keep in mind that this is quarterly data, so depending on when you\u2019re looking at it, the situation might be outdated.<\/p>\n You should also consider real estate agents when you\u2019re thinking about professionals who can warn you when the housing market is about to crash. Agents are poised to see issues on the ground as they emerge, so their feelings and confidence on the state of things<\/a> can be telling.<\/p>\n As far as builders go, Page says to keep an eye on price reductions. \u201cBuilders [are] usually pretty on top of things going into the summer season. They typically raise prices going into the selling season. If you start seeing them taking reductions, then that\u2019s a sign that they\u2019re nervous about where things are going.\u201d<\/p>\n It\u2019s not good when people can\u2019t pay their mortgages and foreclose on their home, but when it happens at scale, it can mean a housing market crash is near.<\/p>\n A foreclosure happens when the owner of a home stops making mortgage payments, which causes the bank to take back possession of the property and put it up for sale at auction. To put things into perspective, during the 2008 housing market crash, there were more than 3.1 million foreclosure filings. This means that 1 in every 54 households<\/a> in the U.S. received a foreclosure notice.<\/p>\n There are numerous websites that can help you stay abreast of foreclosure trends and statistics, such as ATTOM<\/a>, that you can continue to check.<\/p>\n Begin by looking at foreclosure filings and foreclosure activity. This tells you whether foreclosures in the United States are up or down. It\u2019s a good idea to then compare your state\u2019s foreclosure number to the national number.<\/p>\n Local markets don\u2019t always correspond with the national market. They may show a decreasing foreclosure rate, while the country is seeing an increasing foreclosure rate. You can compare this month\u2019s foreclosure rate to that of last month and last year to get a better idea of where we are headed. An increase in foreclosure rates is often indicative that people are struggling financially and an area is more vulnerable<\/p>\n![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\"){kind=logo}
\n <\/div>\n \n What's your home worth today?<\/h3>\n
1. Home prices are plateauing after long periods of rapid acceleration<\/h2>\n
2. There are a lot of risky mortgages in the market<\/h2>\n
3. A lot of loans originated require mortgage insurance<\/h2>\n
4. Interest rates start rising<\/h2>\n
\n <\/div>\n \n Find a top real estate agent near you<\/h3>\n
5. There are more houses for sale<\/h2>\n
6. People aren\u2019t feeling confident about buying right now<\/h2>\n
7. \u2026 And neither are mortgage lenders<\/h2>\n
8. In fact, neither are agents or builders<\/h2>\n
9. Foreclosures are up<\/h2>\n