Will there be a housing crash; a 2010 do-over?

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Real Estate

I keep getting asked this question.  It is a fair question.  Many of us remember when the housing prices went crazy in 2006 and was followed by a crash.  Many families ended up in foreclosure. A lot of consumers seem to believe this will happen again.  One has to admit that the 16% annual increase in the average home price reported in December 2021 just doesn't seem sustainable.

When I read what the economists are saying and when I speak with local mortgage lenders, I get the impression that this will not be a repeat.  Housing crashes occur when demand can no longer justify the rapidly growing home prices.  When the crash occurred in the early 2000's, there were a lot of bad mortgages.  Banks were loaning money to many who could not afford it and requiring very little money down.  Housing inventory remains extremely low, buyers are making bigger down payments or paying cash, and banks are making risky loans.

Home prices are expected to return to a more typical growth rate in 2022.  The National Association of Realtors is predicting 3 to 5%.