Are home prices going to crash?

With steadily rising mortgage rates, ongoing inventory issues, and increasingly tough competition for deals, the party that has been the United States housing market may be coming to its natural conclusion for many homebuyers and investors.

But according to David Greene, the host of the "BiggerPockets" podcast, things are still looking up for smart buyers and property owners.

During a recent interview with Insider, Greene said he thinks home prices are still due for one of their biggest runs yet.

"Prices are going to continue to grow. I think they're gonna grow faster than we can get a handle on them," Greene said. "I think this spring is going to be one of the busiest and hardest home buying seasons that we've seen in my lifetime."

Back in November, Greene, who in addition to hosting the "BiggerPockets" podcast, is a loan officer and owner of a mortgage company, chalked his bullishness up to demand for housing outpacing supply, and the fact that lending standards are much tighter than they were during the 2008 housing crisis.

But not everyone shares Greene's bullishness. Home prices fell at the end of last year for the first time since the start of the pandemic. 

According to data from the Census Bureau and the Department of Housing and Urban Development, the median home price in the US fell to $408,100 in the fourth quarter of 2021 from $411,800 the quarter before. The slight decline comes after a 27.4% increase since the second quarter of 2022, when the median home price was $322,600. 


In addition to the slight dip, the Federal Reserve is preparing to raise interest rates at its Federal Open Market Committee meeting this week — a move which is expected by investors to be the first of several rate hikes this year.

Rising interest rates have a direct impact on home shoppers, as buyers have to continually reassess their purchasing power as higher interest rates mean more money spent on loan interest. Lower interest rates, on the other hand, allow buyers to put more into the equity of the house, which is a boon for prices — particularly so during 20202 and 2021. 

Predicting the market is tricky. While Greene sees more gains to be had, others caution of a correction.

And some experts and industry veterans suggest that anyone who stands to benefit from the continued run on the housing market — particularly investors, real estate agents, and mortgage brokers — are naturally going to keep pumping air into the bubble.

According to Desmond Lachman, a senior fellow at the American Enterprise Institute, former deputy director for the International Monetary Fund, and former strategist at Salomon Smith Barney, rising interest rates are going to be devastating for home prices in the months ahead. He told Insider in February that the increasing rates are the most crucial part of the equation right now for home prices.

Others have echoed arguments that the housing market is in a precarious situation. Ivy Zelman, a former Credit Suisse analyst and the founder of research firm Zelman & Associates, said on a recent episode of the "BiggerPockets" podcast that she sees housing supply increasing in the months and years ahead and that population trends are bearish for the market.

But Greene, who has written multiple books on real estate investing, believes these arguments are misguided. 

In our recent interview with him, Greene broke down his reasoning for disagreeing with some of the bearish sentiments towards the current housing market. The arguments, and Greene's thoughts on them, are laid out below.

The Fed's about to go on a hiking spree. Won't rising interest rates kill home prices?

For experts like Lachman, the equation is simple: Rising rates will mean more money going to lenders and less money going towards a property's equity. 

Rising interest rates slow down economic growth and raise the price of things like car and credit card payments, and Lachman believes that a breaking point will come — possibly sometime later this year — in which the economy will enter into a recessionary period. In a recession, the tides could turn on sellers as home values will likely drop and buyers will look to pay far less for homes, Lachman said.

But for Greene, rising rates may not have as dramatic or significant impact on the overall housing market because demand still outpaces supply. The supply-demand mismatch is so great, he said, that rates will have a negligible effect.

"If you imagine a teeter-totter, you've got the lack of supply as a huge, heavy person sitting on one end, and then on the other end is a really light person," Greene explained to Insider. "And as the Fed makes some of these adjustments, it's not even close to enough to get some balance."

"They need to build more homes. There's no way around it," he elaborates. "They need to decrease regulation, increase incentives for developers, and make it a priority to get more housing so that we bring some balance to the force, which would allow your red-blooded average American who just wants a house to live in to have a shot."

Speaking of supply, we could get a flood of empty houses coming onto the market for a variety of reasons (i.e. supply chain issues being resolved and overbuilding). Wouldn't this be bearish for home prices? 

Greene said Zelman could very well be correct in the sense that we could get a flood of supply to the market. But he said this would happen over an extended period of time and will be easy to spot.

"We'll see that coming. It's not like that can really sneak up on you," he said. "If we start building too many properties, people like Ivy will put that out there, too. It will be easy to see."

Furthermore, because this would happen over a period of time, Greene argues that with inflation, property values will still go up, even if they don't end up being as high as they could have been otherwise.

"If we're going to have oversupply in 20 years, and you have an opportunity to buy a house right now for $500,000, what is that house going to be worth in 20 years? Even if you end up selling it for half of what you think you could have at one point — if it goes from $500,000 to $2 million, and then you sell it for a million, you still end up coming out on top," Greene said.

What's more, Greene said that the current lack of supply is so dire that he would welcome new inventory. The biggest problem he sees at his mortgage firm is that he often has a dozen bidders on one property, and he's unable to serve some clients.

A lot of people that have properties they want to offload in order to lock in the appreciation they've seen over the last couple of years. That too could lead to a flood of new properties hitting the market, right?

Greene rejected this argument for two reasons. First, if the person wanting to sell a property lives in it, they'll have to find another place to live. 

Second, if the property is an investment, the investor would likely use a 1031 exchange to avoid paying taxes on the capital gains they've seen. This means they'll take their profits and use them to buy different properties elsewhere.

What about the fact that population growth is decreasing?

Population growth in the US is slowing down, with the rate being just 0.1% from July 2020 to July 2021 — the slowest year on record. And between 2010 and 2020, the US population only grew by 7.8%, which was the slowest pace since the 1930s.

Greene said he recognizes that the achilles heel of real estate investing is that you need a tenant, and if population is dwindling, tenants become harder to find. But he made the point that changes in population happen very slowly. 

"It takes so long for the impact of that to catch up," he said. "If everyone right now stopped having babies, we'd still have 26 years of people coming along that need to buy a house."

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