The Federal Reserve's efforts to combat inflation in the housing market appear to have had some success. In February, home prices fell year-over-year for the first time in 131 months. However, the median price of a home increased month-over-month for the fourth consecutive month in May. According to data from the National Association of Realtors, the median existing-home price in May was $396,100, which is 3.1% lower than the previous May's median price of $408,600.
Despite these fluctuations, housing experts do not believe a housing crash is imminent. They argue that for a significant drop in home prices to occur, there would need to be a dramatic decrease in demand or a significant increase in supply. Currently, uncertainty in the economy and the housing market is causing some prospective homebuyers to hold back, but overall demand for housing remains strong.
One factor contributing to the stability of the housing market is the limited housing inventory. The number of homes for sale has been decreasing, down 40% from the first quarter of 2019. This limited supply, coupled with the fact that many mortgage holders have locked in low interest rates, discourages current homeowners from selling and buying at higher rates. As a result, home prices have remained relatively high despite rising mortgage rates.
While the housing market may experience some price corrections, experts believe they will not be as severe as the 2007-2009 housing crisis. Unlike in the years leading up to the crisis, current loan underwriting standards are stricter, even with low interest rates. This helps mitigate the risk of subprime loans and other risky lending practices that contributed to the previous crash.
In summary, the Federal Reserve's efforts to cool down the housing market have had some impact, with home prices falling year-over-year in February. However, the market remains stable, and experts do not foresee a housing crash on the horizon. Limited housing inventory and stricter loan underwriting standards are factors contributing to the market's resilience.