7 Simple Ways to Predict a Housing Market Crash

Home prices began to soar, reaching all sorts of new-high. Soon, mortgage-backed securities were sold off in large volumes, and mortgage defaults and foreclosures rose to record-breaking levels.

7 Simple Ways to Predict a Housing Market Crash

1) When Interest Rates Are High Enough, Homeownership Is Put Out Of Reach

Interest rates and the spread of credit play a crucial role in the availability of credit to build houses. Most homebuyers do not pay capital upfront, mainly because they don’t have half a million dollars to invest in real estate.

2) Observe Leading indicators

Identifying housing market indicators is key to predicting housing market crashes. Indicators like building permits, housing starts, and new home sales data are released once every month, available for free download.

3) Compare Rental To Capital Values

One of the most proven ways to identify signs of a housing market crash is to compare rental values to capital values. When the underlying properties of the economy change, the rental and capital values simultaneously change.

4) Analyze Housing Linked Commodities Market

The commodity price of lumber could be a great indicator of a housing market crash. When the prices of lumber crash, it usually coincides with peak house prices.

5) Utilize the Stock Market as an Indicator

The S&P 500 Index is the main measure of the US’s economic health, made up of the top 500 blue-chip companies – some of them being housing-related. Investors often use global stock markets to express their opinions on real estate.

Swipe up now to read the full post!