History of Housing Market Crashes and What They Mean for the Future



When Will the Next Housing Crash Happen?

If you’ve paid any attention to real estate in the past couple of years, then you’ve seen a lot of disruption in supply, demand, and pricing—as well as a lot of speculation about if (and when) another crash might occur.

The 2008 housing market crash had an echo effect throughout the American economy, with a lot of its impact still being felt today. Some of those impacts are good, including more transparency for buyers in the lending process and higher qualification requirements for optimal rates. However, we’ve also seen a stark decrease in access to home ownership, with many people wondering if another crash is in the cards.

So, is another housing marketing crash likely? Here’s what to know about housing crashes in the U.S., including why the next one might be further off than you think.

History of U.S. housing crashes

The housing market is inherently cyclical, and ebbs and flows are a natural part of that cycle. Throughout the years and decades we’ve seen a lot of predictable patterns as the market slows down, speeds up, and then slows down again. That being said, massive crashes on the scale of what happened in 2008 are quite rare, and most of the time the market bounces back from a downward swing without serious hardship.

There have been five major housing crashes in the United States, each of them preceded by a major historical event:

1837

– A housing crash followed The Great Panic, a period of financial turmoil when banks suspended payments and loans in response to larger economic declines in the country.

1873

– Falling stock prices once again tanked the housing market, which was eventually revived by lowering interest rates—a trend that lasted in some form until about the early 1900s.

1929

– The crash of Wall Street and the start of the Great Depression. Property values dropped significantly and banks greatly limited their lending practices, recovering only in the boom that happened after the second World War.

1974

– Another massive hit to the stock market and another subsequent housing crash. This crash was also preceded by record inflation, which sent home prices soaring and priced a lot of families out of the market.

2008

– Predatory lending practices resulted in people buying homes they couldn’t afford and eventually led to a bubble when many homeowners couldn’t make their loan payments. This started a nationwide recession that was in many ways equal in scope to the Great Depression.

This quick look back at housing crashes of the past is actually a reassurance of our ability to adapt to economic changes without widespread market destruction. And while there’s no denying the seriousness of the crashes that did occur, they’re surprisingly few and far between when considering how many ups and downs the U.S. economy—and the U.S. real estate market—has taken over the years.

Is another housing crash likely?

There’s no doubt that we’re in a unique economic period right now, but whether that will lead to a housing crash is very much up for debate.

Record low interest rates and regulatory abolishment of the lending practices that were partially responsible for what happened in 2008 mean that we’re in a much better place than we were in decades’ past. Also, many people have fled the cities due to covid-19 and the ability to work from home. They, along with many retirees, continue to buy land and houses in smaller cities or rural areas. Whether a housing crash is on the horizon isn’t clear yet, and a housing boom could be just as likely.

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