Next Housing Crash Prediction: Will the Bubble Burst in 2022?

Summary:
• The housing sector is cooling down as interest rates rise in most countries. What should we expect in the near term?

The housing sector is cooling down as interest rates rise in most countries. As a result, there have been worries about when the housing bubble will burst and whether it will happen in 2022. In this next housing crash prediction, we will assess whether it will happen this year and what to expect. 

Recent housing data

Housing is an important part of all countries, explaining why prices have risen in the past few years. The surge was mostly because of the relatively low-interest rates, surging demand, low supply, and the high cost of building. For example, the price of lumber, cement, paint, and other building materials has risen.

However, recent data shows that the housing sector is slowing down. First, data published last week showed that new home sales declined by 16.6% in April as prices kept surging. Further numbers revealed that pending home sales also declined sharply in April. Other numbers like existing home sales, building permits, and housing starts have also moved lower.

The same trend has happened in other countries like Australia, New Zealand, and the UK. Data published by Zoopla showed that home prices in the UK surged to a record, although growth is cooling. One in 20 properties listed in the portal saw a price reduction. At the same time, homes are taking longer to sell, with an average three-bedroom property in London taking 18 days to sell. Another sign is that the number of homes being put on the market has increased.

Another report by Rightmove said:

We anticipate that the effects of the increased cost of living and rising interest rates will filter through to the market later in the year. A combination of more supply of homes and people weighing up what they can afford will help to moderate the market.” 

Will the bubble burst?

Some analysts believe that the housing market will burst in 2022. For example, in a recent statement, Jeremy Grantham, a legendary investor, warned that we are in a superbubble that will likely burst soon. In fact, there are signs that some Fed officials want prices to moderate. 

In a statement this week, Christopher Waller said that he would support rate hikes above the neutral point in December this year. If this happens, the rising mortgage rates could surge and push prices lower.

Therefore, it is still unclear whether the housing bubble will burst this year. What is clear is that prices will start moderating this year. An analyst told Fortune: “The shift needs to be put in context. Housing demand was manic for the past two years, and the shift that we’re seeing so far isn’t catastrophic. While demand has softened, there are still more buyers than sellers given the acute lack of inventory.”