Labor.
William Edwards, 6-24-2023, a senior investing reporter at Insider based in New York. He has graduate degrees from Ohio University and the University of Leipzig, and he earned his bachelor's degree at DeSales University. From central Pennsylvania, William has interned and written for Bloomberg News, CNBC, and Bicycling, and has studied or reported in France, Germany, and Tunisia. He's interviewed some of the most influential voices in the market, including Rob Arnott, Savita Subramanian, Ken Rogoff, Rick Rieder, Mike Wilson, Wei Li, Cam Harvey, Thomas Peterffy, Jonathan Golub, Skylar Olsen, Keith Parker, and more. In addition to chatting about markets, William is always eager to talk about pro cycling, Bundesliga soccer, and how to boost youth engagement with financial news. “Forget about a housing market crash, Harvard researchers say. Here are the 4 reasons they say a repeat of the mid-2000s drop in home prices is unlikely.," Business Insider, https://www.businessinsider.com/housing-market-crash-not-coming-supply-mortgage-rates-millenials-harvard-2023-6 ---ML
But forget about a crash like we saw then, say Harvard University researchers.
In a report published June 21, researchers at the Harvard Joint Center for Housing Studies said home price growth would probably stagnate as high mortgage rates continue to weigh on demand. Despite the huge run up in prices seen over the last few years, there are too many factors acting as a floor under home values to see significant declines, they said.
"Although national home prices have declined in the past several months, they have risen astoundingly when measured from the start of the pandemic. Between February 2020 and February 2023, nominal home prices jumped a stunning 37.5 percent, or 17.5 percent after accounting for inflation," the report said.
"That said, increased interest rates have also led to significantly higher monthly payments for potential homebuyers, and demand has cooled in response. As long as interest rates remain elevated, home price growth will likely continue to slow. But prices are unlikely to plummet like they did during the Great Recession," it continued.
4 reasons why a crash à la the mid-2000s is unlikely
The researchers listed four reasons why they see a crash in home values as unlikely. First is that the labor market remains healthy.
The US added 339,000 jobs in May, and the unemployment rate is still historically low at 3.7%. When the labor market is strong, it supports demand for housing because people feel confident that they'll be able to make their mortgage payments and feel that they can use savings on a down payment.
Recession risks are brewing, however, as the Federal Reserve leaves rates elevated to fight inflation. The Fed itself projects that unemployment will rise to around 4.6% by the end of the year. If that happens, it could hurt housing demand and negatively affect prices. But so far this year, the labor market has continually surprised economists to the upside.
Economists calling for a bigger drop in prices — like Ian Shepherdson and Desmond Lachman — both see a recession unfolding later this year.