A decade after the financial crisis and the housing meltdown, worries that the housing market is headed for another significant downturn are unfounded, according to the chief economist for the National Association of Realtors.
The housing market has essentially recovered from the financial crisis, with mortgage default and foreclosure rates near record lows, Lawrence Yun said. He said that he believed some of the nation’s most overheated real estate markets will see sales slow this year – as many already have – but stressed that those slowdowns were due to low inventory and rising prices, not weak demand. However, Yun did warn that home prices in many areas were rising at an unsustainable rate.
“Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher-than-normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession,” Yun said. “Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory accompanying unsustainable home-price increases.”
Yun cited strangled inventory as the main issue in the housing market right now. Inventory levels have fallen for three consecutive years, according to NAR.
“The answer is to encourage builders to increase supply, and there is a good probability for solid home-sales growth once the supply issue is addressed,” he said. “Additional inventory will also help contain rapid home-price growth and open up the market to prospective homebuyers who are consequently – and increasingly – being priced out. In the end, slower price growth is healthier price growth.”
Yun anticipated a rise in inventory and moderate price growth in 2019, according to NAR. He projected that existing-home sales would rise 2% in 2019, while home prices would rise by 3.5%.