Is a housing crash inevitable? – A must read

JOHN EDITED

Broker/Owner

Is a housing crash inevitable?

How many of us have heard, “the real estate market cannot continue the way it is”, and that is “has to crash soon”.    I am going to be 100% honest with you.  Can the real estate market in Sun Prairie, Verona, and other communities continue at the current pace?  The answer is no, but that does not mean that the market is going to crash like in 2008.  The economy in the United States and Dane County is great and is not showing any signs of slowing down.   The real estate market is just like the stock market.  It has ups and downs. You look at investments over a period of time.  Many new Realtors® don’t remember in 2013 when home values went from $212,000 to $195,000 and then in 2015 values went from $235,000 to $230,000.  Everyone was in a panic because of the ‘looming housing crash’, but that crash never happened because the market did what is normal.  During the two years where the market decreased (2013, 2015), the average home still increased in value by 4.5%.  Look at the two graphs below, one shows the drastic increase in home prices before the market crashed on the left in red, and the current price increases (on the right).

PicMonkey Collage

Home prices increased 42% from 2000-2008.  Prices went from $200,000-$340,000.  That steep of an incline in any market is not normal.  If you look below it shows a normal real estate market.  This is between years 1963-1999.

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With our knowledge and experience in the real estate industry we predict a slight decline (1%-2%) in home prices over the next 18 months. During the next 36-48 months we predict home prices will increase 3 to 4 percent.  So the question, “Is now a good time to buy”?  The answer depends on if you are planning to keep your home (investment) for less than 2 years or more than 2 years.  If less than 2 years we would probably wait a year.  Yes, a licensed Real Estate Professional just told you it would be better to wait to buy if you are keeping your home less than 2 years.  If you plan on keeping your home for more than 2 years we would recommend taking advantage of the lower interest rates and gaining equity as rent prices continue to rapidly increase in Dane County.

 
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Sources: Wisconsin Realtors Association, U.S. Census Bureau, Irreational Exuberance 2nd Ed.

John Reuter is a licensed Real Estate Broker with Home Buyers Marketing II Inc., and Broker/Owner of The Reuter Team.   To learn more about our team, and how we reward Heroes that serve our communities and the nation we welcome you to visit our website www.thereuterteam.com or follow us on Facebook.