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The housing market is extremely hot right now in many developed countries like the US, UK, Australia, and New Zealand. This boom has been driven by a long period of ultra-low interest rates, low housing inventories, and increased demand as people tap into their Covid-19 savings. With central banks raising interest rates, many are wondering when the market might crash. So, what’s the latest prediction for the next housing crash?
Home prices have surged dramatically worldwide. In the UK, data from Halifax and Nationwide show that prices kept climbing in March, rising more than £25,000 over the past year. In London, prices increased at an annual rate of 7.4% in March, the fastest pace since 2016.
This trend isn’t limited to the UK. In the US, home prices have also soared, leading some to warn of a potential bubble. Countries like Australia, Austria, and Canada are experiencing similar issues.
The reasons behind this crisis are quite consistent. Extended periods of low-interest rates, stimulus spending, and stay-at-home orders have driven more people to buy property. Additionally, demand has been spurred by people investing in second and third homes.
Meanwhile, housing inventories have been tight due to various factors, including shortages. Rising costs of materials like paint, steel, lumber, and cement have also pushed house prices up.
With central banks such as the Federal Reserve, Bank of England, and Bank of Canada raising rates, many are concerned about when the next housing crash might occur. Current market conditions bear some resemblance to those of 2006. As home prices continue to rise, fewer people may be able to afford them.
Recently, the Reserve Bank of Australia predicted that house prices could drop by 15% over the next two years. Other experts agree, noting that companies like Better.com and Rocket have struggled recently.
While house prices are expected to remain high for now, a crash like the one in 2008/9 seems unlikely. However, with the Federal Reserve raising interest rates, prices are likely to start falling in the coming months.