Is the Housing Market going to Crash?

📈 Is the Housing Market Going To Crash? What the Experts Project

If you have encountered alarming headlines or social media posts predicting a housing market collapse, it is natural to feel concerned that California home values might soon decline. However, the basic reality is this:

The available data does not indicate a crash. Instead, it suggests a path of gradual, stable growth. What happens will vary significantly by local area, particularly here in the Central Valley. Some local markets will experience greater price appreciation than others. A few might even see minor, temporary dips. Nevertheless, the consensus is clear: home prices in California are expected to appreciate both nationally and locally over the next five years.

The True Outlook Is in Expert Forecasts

The Home Price Expectations Survey (HPES) conducted by Fannie Mae gathers projections from over 100 leading housing market experts each quarter. In the most recent survey, experts concurred that national prices are forecast to increase through at least 2029. This includes specific insights relevant to California and Central Valley markets.

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Here’s how to read this visual: each bar in the graph shows an increase, not a loss. It’s just that the anticipated pace of appreciation varies year-to-year.

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When these expert projections are analyzed, they fall into three categories: the overall average, the most optimistic predictions, and the most pessimistic predictions. Even the most conservative forecasters anticipate price growth of nearly 5% over the coming years:

• Overall, prices are anticipated to climb approximately 15% from today through the end of 2029.
• The optimists project an increase of roughly 26%.
• Even the pessimists expect a 5% gain during that period.

The most important takeaway is this: none of these groups are forecasting a crash or a decline, either nationally or in local California housing markets, within the next five years.

Comparing This to a "Normal" Market

Looking closely at the projections, they call for annual price increases of 2 to 3.5% over the next five years. For perspective, the average rate of appreciation over the last 25 years was closer to 4 to 5% annually.

While this new rate is slightly below historical averages, it is far more sustainable and typical than the extreme growth observed between 2020 and 2022. During that period, prices surged too quickly due to record-low inventory and extremely high demand, with some regions seeing annual climbs of 15 to 20%.

While current market activity may seem stalled compared to the rapid increases of the pandemic era, the market is actually just moving toward a healthier, more balanced state.

Why a Price Collapse Is Not Expected

Much of the current concern about home prices stems from the recent rapid appreciation and the old notion that "what goes up must come down." Historically, however, this has rarely been true for housing. Home prices nearly always rise over the long term, and California is no exception.

The main reason we are not headed for a scenario like 2008 is straightforward: supply and demand. Even with current affordability issues, there is still an insufficient number of homes to meet the needs of all potential buyers. This persistent inventory shortage maintains upward pressure on prices, nationally and in local Central Valley areas.

Experts agree: we are not facing a price collapse, but rather a phase of steady, long-term appreciation. Furthermore, even when economic shifts occur, the housing market has consistently recovered over the past 50 years, and we are now entering that recovery phase.

Bottom Line

If your decision to buy or sell has been on hold due to fears of a market crash, it is time to focus on the data, not sensational headlines. The real question is not if home prices in California and the Central Valley will increase, but by how much.

Let us connect. We can help you understand what is happening specifically in our local housing markets, what these expert forecasts mean for your individual next step, and how trusted local mortgage loan originations from Lend Mortgage Solutions can assist you.

With loan options that are transparent, built on integrity, and highly trusted by clients, realtors, and businesses, we will empower you to make confident decisions in any market condition.

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