Ease your Mind about the Housing Market Crash of 2021
The good news is, there isn’t going to be a housing market crash this year. At least, that’s the opinion of those in the know. We’ll tell you why they come to that conclusion in this post.
The notion of a crash has only come up in recent months anyway. It’s because of the way the property market has performed so well during lockdown. And, it seems, will do beyond that too.
One of the big proponents of the housing crash scenario is Kerry Killinger, former CEO of Washington Mutual Savings Bank. That’s understandable since his bank suffered badly during the 2007-2008 banking collapse.
Fears of recession repeat are quashed
And yes, it is the case that house prices have risen over the past year and continue to do so. In the northwest of England, they’ve increased by 11% year-on-year.
In Wales, the figure is 13%, according to the latest Rightmove report. Not only that, but prices rose by £5,767 from March to April this year.
The Stamp Duty Holiday extension is still in full swing in England. That’s where buyers can save up to £15,000 on the first £500,000 of a property. It ends in June, but buyers will still be able to benefit from a £250,000 tax-free saving until September 30.
But that’s not the only reason the property market is in full swing. The desire for house owners to move from cities to greener, more rural or coastal destinations has also had a big hand. So too has low-interest rates and now the government’s new 95% mortgage deal (and which isn’t just restricted to first-time buyers).
Going over to America, where the housing bubble first burst and where the fear of a repeat is loudest, chief economist Doug Duncan of the Federal National Mortgage Association (FNMA). Insists lenders are keeping strict underwriting. That means not as many people are getting mortgages.
Boomers living longer than expected and ‘staying put’
In addition, mortgage rates remain historically low – with the result fewer people will fall into mortgage arrears.
Then there is the fact that there will always be fewer homes than is needed. One of the reasons for this is the Boomers are living longer.
They’re healthier and aren’t moving out. Says @D2_Duncan: “Next, millennials are moving into a peak home-buying age. Third, the robust economy ahead will bring solid jobs growth.”
Duncan also points to the fact that there is no frenzied insider trading like the activity that existed before the 2007-08 crash. Many developers are financially healthy too.
As well as benefiting from the knowledge their homes will sell due to high demand, there is also the fact they are enjoying lower debt interest, high margins, and growth in cash flow as a result.
In other words, the scaremongering over another housing crash this year is just that – scare stories caused by over-cautious bankers, according to Duncan and his finance colleagues.
See more housing and property news in general at our CheckedInn.
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