History has taught us lessons about recessions, depressions, stock market crashes, housing market crashes and even pandemics. We can learn from the past to prepare for the future. One thing we know for sure is that the economy always fluctuates. On the same note, people can expect major changes in the real estate market over the next 5 years as technology evolves.
Robots will take more jobs than Covid, so educating people on new technologies will be of high priority. Reno is a great example of this. When Tesla moved its battery facility to the Reno area, there were simply not enough local residents who knew how to work in that profession. As a result, Tesla helped to fund new classes at the local colleges and universities to train more people on their new technology. Job growth is phenomenal in the area, along with the demand for housing.
There are housing markets around the country that will get hit harder than others–particularly bigger cities. A dense population, expensive housing and a high cost of living is already driving people away from big cities and into smaller metros or suburbs that offer more affordability and a better quality of life. There are several markets in the U.S where home prices are at their highest level ever. That’s because low interest rates have made these areas more affordable, even if prices are higher. This does not mean they are in a bubble. It just means that prices are higher than they have been, and maybe salaries are as well. It may also be that there is simply not enough inventory to meet demand, so those who can afford to pay more will.
Tighter lending standards compared to the 2000s will help minimize the risk of a real estate market to become over-leveraged and crash, as we saw in 2008. The loans that have been made over the past decade are solid, from borrowers with high credit scores, savings, and low debt.
When forbearance for mortgages runs out, it is more likely that lenders will offer a loan modification, moving the owed payments to the end of the loan cycle. Banks don’t want a housing crash because it hurts them the most. They will work with the borrowers who were not at fault for losing their jobs and businesses.
Based on the simple economics of supply and demand, I do not foresee a national housing market crash in the next five years.
