Strong Arguments Agitating Against an Impending US Housing Market Crash in 2021 or 2022
The apprehension of a severe housing market crash in the United States during 2021 or 2022 is not unfathomable. However, the prevailing favorable factors suggest a resilient and steady economic backdrop. This article delves into several compelling arguments that support the idea that the US housing market's risk of a catastrophic downturn is overstated.
1. Positive Investor Sentiment
Investor sentiment, particularly with respect to real estate, plays a crucial role in market dynamics. As Donald Trump's reelection seems likely, there is a positive inclination among investors to participate in the housing market actively (Investor Sentiment). The perception of this possibility alone is expected to drive more investments into real estate, which is already considered a legal tax haven. Specifically, property taxes and mortgage interest are tax-deductible, and net gains from selling a primary residence up to half a million are often exempt from taxes.
2. Robust Lending Practices and Demand
The quality of lending has improved significantly over the past few years, and a vast majority of eligible home buyers can indeed afford homes (Quality Lending Practices). However, low inventory and insufficient housing supply continue to increase property values. The government's intervention with trillions of dollars pumped into the economy, including potential additional funds, offers a strong support mechanism. With this influx of money and low interest rates, inflation might rise, pressuring property prices higher as the dollar's value dwindles.
3. Government Intervention and Economic Support
The government's proactive role in stabilizing the economy and preventing financial crises cannot be overstated. Massive economic stimulus coupled with the government's commitment to avoid another financial meltdown and mass evictions underscores a robust protective stance. Furthermore, the looming vaccine rollout and anticipated economic recovery are positive indicators for the housing market. Post-vaccination, the economy is likely to experience a significant boost, reducing unemployment rates and further supporting demand for real estate.
4. Millennial Homebuying Trends
Millennials, particularly younger ones, are still a considerable untapped market for home ownership due to financial constraints or procrastination. Many are now realizing that the optimal time to purchase a home is when they are in their mid-30s with a 30-year mortgage, aiming for ownership by retirement age. The limited number of homes on the market, coupled with pent-up buying demand, ensures a resilient real estate market.
5. Political Predictions and Impact
The outcome of the election will significantly influence the housing market's dynamics. If Donald Trump wins, the bullish reassurances will continue. Alternatively, if Joe Biden secures victory, his proposals, including higher capital gains taxes and corporate tax hikes, could potentially drive investors into real estate. Higher taxes on capital gains and stock market transactions, in addition to a weaker stock market, are expected to steer investments into real estate, bolstering prices further (Political Impact on Real Estate).
Conclusion
While the housing market faces certain challenges, the abovementioned factors signal a more stable and resilient future. Financiers, investors, and homeowners should maintain a cautiously optimistic outlook. The finite nature of buildable land and the historical trend of property values increasing over time further fortify the case for maintaining a positive stance on the U.S. real estate market's trajectory.