Despite frequent discussions about a potential downturn in the real estate market, multiple indicators suggest that the U.S. real estate market may be healthier than widely perceived. One reason for this optimism is the robust housing demand bolstered by millennial buyers who are entering their prime homebuying years. Additionally, the low unemployment rate and steady wage growth have provided a fertile ground for home purchases, even amidst rising prices.
Moreover, the housing supply remains limited, which has prevented a significant market decline. The underbuilding that followed the 2008 financial crisis has resulted in a deficit of homes, particularly in the affordable price bracket. This scarcity of inventory has propped up home values and mitigated the risks of a sharp price collapse.
Furthermore, lending standards have remained stringent since the last financial crisis, which means that borrowers obtaining mortgages today generally have stronger credit histories and are less likely to default on their loans compared to pre-crisis borrowers. As a result, there is a lower risk of a foreclosure wave that could destabilize the market.
Another pillar of strength for the U.S. real estate market is historically low mortgage rates that continue to make purchasing a home more accessible for many Americans. Even with expected increments in interest rates by the Federal Reserve to combat inflation, rates remain comparatively low from a historical standpoint.
Finally, real estate technology innovations and digital platforms have made the buying and selling process more efficient and transparent, attracting new investments and maintaining high levels of market activity.
Collectively, these factors contribute to an underlying resilience in the U.S. real estate market which might indicate better health than what is assumed based on more pessimistic projections. While there may be localized adjustments or cooling in certain markets, overall stability seems to be prevailing across the nation’s housing landscape.
