Housing Market Crash

Housing Market Crash: Is The Real Estate Market Going To Crash

Gustan Cho Associates are mortgage brokers licensed in 48 states

This ARTICLE On The 2020 Housing Market Crash: Is The Real Estate Market Going To Crash Was PUBLISHED On March 15th, 2020

Housing Market Crash
Gustan Cho Associates
Are we headed for another Housing Market Crash in 2020?
  • The 2020 Housing Market Forecast was strong until the coronavirus outbreak in December 2019
  • The coronavirus outbreak has disrupted the world economy
  • Stocks entered in a correction territory a few weeks ago due to stock markets plummeting
  • The stock market has entered bear territory due to dropping more than 20% since its all-time high on February 19th, 2020
  • President Trump declared a national state of emergency for Americans on Friday, March 13th
  • The Trump Administration has banned world travel for 30 days due to the coronavirus pandemic
  • The Dow Jones and other market indexes are having 1,000 plus points up and down days
  • Fear and uncertainty are overwhelming
  • Many industries in the travel, hospitality, and others are being really affected by the coronavirus outbreak
  • There is no cure and/or vaccine for the coronavirus
  • There are more and more people testing positive and dying from this unknown deadly contagious virus
  • Economists and experts predicted the housing and mortgage markets would not be affected for 2020
  • Mortgage rates hit a historic all-time low
  • However, economists did a complete 180 degrees and are now talking about a potential 2020 Housing Market Crash
  • Are we going to have a repeat of the 2008 financial crisis?
  • Is the U.S. headed to another Great Recession?
  • Should Americans worry about their economic outlook?
  • Are jobs secure?

In this ARTICLE, we will discuss and cover the topic of the Housing Market Crash: Is The Real Estate Market Going To Crash.

Will There Be A 2020 Housing Market Crash?

The stock market has been extremely volatile and has plummeted from February’s all-time high of over 29,000 to under 21,000 last week.

  • The stock market is now trading in bear market territory
  • A bear market is defined when the market plummets 20% or more from the all-time highs
  • The sudden stock market crash has ended the 11-year bull market run
  • The last recession we had was back in 2008
  • Can we be headed to a recession?
  • Will there be a repeat of the 2008 housing market crash?
  • Will there be a 2020 housing market crash?
  • We do not know whether or not we will be headed in a 2020 housing market crash
  • However, home prices have been rising with no correction for the past several years
  • Both HUD and the Federal Housing Finance Agency (FHFA) has been increasing FHA and Conventional Loan Limits for the past 4 years due to skyrocketing home prices

In the following paragraphs, we will discuss and cover what triggers a housing market crash.

What Americans Think About A 2020 Housing Market Crash

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Is the Real Estate Market Going to Crash?

  • Most Americans are very concerned and worried about a potential 2020 Housing Market Crash similar to the 2008 financial crisis
  • Recent data released from a survey revealed that 57% believed there will be a 2020 housing market crash and pricing correction this year going into 2021
  • 85% of Americans feel that due to a potential housing market crash and potential pricing correction it is a good time to sell their homes
  • Many Americans still remember the 2008 real estate meltdown like it was yesterday
  • Those who have lived through the 2008 financial crisis feel another housing market crash is in the works
  • Many believe that today’s rising housing market is similar to the 2008 housing market prior to the big crash

With the unrest in the stock market and the coronavirus pandemic, most Americans think a recession is lingering and the housing market will go through a correction. As of now, there are no hard facts that the economy will take a downturn. Fundamentally, the US economy was strong prior to the coronavirus pandemic. As the coronavirus is spreading and more deaths are being reported, the economy can get worse. Uncertainty is the biggest fear not just among investors and Wall Street, but to the average American consumer.

11-Year Economic Bull-Market Boom

Which means an 11-year market boom

The US economy has been booming for the past 11 years without a recession. The economy was on turbo-mode after Donald Trump got elected as the 45th President of the United States. Home prices have skyrocketed year after year that both HUD and the FHFA had to increase FHA and Conforming Loan Limits for the past consecutive four years. There is far more demand than the inventory of homes. When demand exceeds supply, prices go up. Many pre-approved homebuyers have been looking for homes for months. Due to the coronavirus pandemic, mortgage rates have hit an all-time historic low. However, many Americans have put the brakes in buying a home since the news of the coronavirus pandemic.

 The Housing Bellwether Barometer is an index of homebuilders and mortgage lenders. In 2017, it skyrocketed like it did in 2004 and 2005. 

The Main Reason For A Slowdown In Purchase Mortgage Applications 

Refinance mortgage applications are skyrocketing. However, purchase home mortgage applications are declining rapidly due to homebuyer’s concerns about job stability. When the stock market plummets like it has been doing, the yield on the US Treasury tanked under 1.0%. When the US Treasury drops significantly, mortgage rates drop as well. Mortgage rates have dropped to an all-time historic low. 30-year fixed-rate mortgages are now at 3.29% for prime borrowers. 15-year fixed-rate mortgages are now at 2.75%. However, the worst fear Americans have is how secure they are with their jobs. Even though the unemployment numbers are at a 50-year low, this was prior to the coronavirus outbreak. A large percentage of company CEO’s ordered workers to work from home. Many industries in the transportation, hospitality, and other industries where workers have human contact are hurting big time. What good is low mortgage rates when you are stressing over the security of your job. Americans are also worried about a housing correction and another 2008 financial crisis. Will we enter into a recession? Many believe the country is long overdue for a recession.

What Experts And Economists Say About A 2020Housing Market Crash

Many experts are unanimous about the US is long overdue of a recession. With a recession comes a housing market correction. In March 2017, former president of the Federal Reserve Bank of St. Louis William Poole wrote about another 2008 financial crisis in the coming months. Mr. Poole mentioned the fact that 36% of conforming loans require private mortgage insurance. Those numbers were similar to the data from 2006. William Poole was the chief of the Federal Reserve Bank of Kansas who predicted a financial meltdown coming soon in 2005.

Effects Of The 2020 Housing Market Crash

What may be the effects of the crash on the housing market in 2020?

In the event, if there is a 2020 Housing Market Crash, it will not be close to the 2008 financial meltdown. Housing demand will still remain strong with the growing population in the US. The economy may have a setback but is fundamentally strong. There are new mortgage regulations that emphasize the borrower’s ability to repay. Mortgage rates seem like they will be at historic low levels for quite some time. Many lenders are creating and implementing more alternative financing loan programs such as Non-QM loans, bank statement loans for self-employment borrowers, fix and flip mortgages, and other unique niche mortgage programs. For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

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