Will the Louisiana housing market crash? Thankfully, the short answer is “no.” However, the long answer deserves further discussion. Smart Move Real Estate wants to make homebuying easier by giving you the information you need to have confidence in your financial decisions.
Written in collaboration with Chelsea Snyder.
Chelsea Snyder is a Smart Move Real Estate agent from Baton Rouge. After experiencing the homebuyer process, she realized her passion was to help light the way for others on this journey. Treating each client like family, she ensures they are confident and informed through each step of the homebuyer journey.
Before assessing the well-being of our market, let’s define a housing market crash!
What Is a Housing Market Crash?
In a housing market crash, homeowners typically experience an unanticipated, drastic decline in the value of their houses. Homeowners begin to pay more on their mortgage than their home is worth. This forces potential buyers to wait out the market or sell at a loss.
That said, what causes a crash?
What Causes a Housing Market Crash?
A housing market crash occurs after a rapid and unexpected drop in the value of homes. These drops often follow an artificial spike in a market, referred to as a bubble. Housing bubbles are the result of economic booms fueled by speculative investing. In other words, irrational investments that are not backed by genuine sources of demand. These sources of demand are otherwise known as the economic Fundamentals.
Is Louisiana’s Housing Market a Bubble?
It’s easy to assume that the housing market is going to crash. Louisiana buyers have seen some extreme rises in home prices. Additionally, national mortgage rates are also reaching their peaks.
That said, though these price surges were sudden, they resulted from very real streams of demand.
5 Reasons the Louisiana Housing Market Is Unlikely To Crash.
1) Low Inventory
Though frustrating for movers, the lack of housing on the market is a positive for market conditions. Prices will naturally rise during a shortage, demonstrating validity in the rising prices of homes.
2) Lack of Housing Construction
Builders have learned their lesson after the housing surplus in 2007. That’s partially why construction of new homes has slowed down. Even if builders were racing to increase their output, they legally couldn’t buy the land, get regulatory approval, and craft the homes fast enough. Additionally, rising inflation and declining imports also slow new construction.
3) New Buyers
The entrance of the prime buying demographics is another reason the rise in prices is justified. Millennials are reaching the stage of life where they have the purchasing power for home ownership. The U.S. is also seeing a large rise in Hispanic immigrants. The rise in new buyers demonstrates a real demand that’s driving up prices.
4) Stricter Lending Standards
A major cause of 2008’s Great Recession was a lack of credit standards enforced by banks. Many unqualified buyers received loans, inflating housing demand without having the money to justify it. Today, loans are granted on a much stricter basis.
5) Drop in Foreclosures
Crashes are often punctuated by a surge in foreclosures due to owners not being able to afford their mortgages. Today, owners in the US possess much more equity in their houses than before.
Navigate Market Conditions With Confidence!
That being said, though the housing market conditions are dynamic, they do not forecast a crash. Since the stark rise in home prices is supported by financial fundamentals, the market is acting naturally. Though America is biting the bullet of high mortgage rates and home prices, there is a light at the end of the tunnel.
Want to navigate the housing market with confidence? Smart Move Real Estate ensures all clients understand each step and nuance of the real estate transaction. If you would like to buy a home in Louisiana, send us a message or call us at 225-448-2850. Our agents look forward to hearing from you!