The housing market is unpredictable, to say the least. While analysts can attempt to predict the next few years in the market, nothing is certain. Currently, the housing market is at risk to face a perfect storm. In the United States, it has already been 12 years since the last large housing market crash that led to a harsh recession. Here are five reasons why the housing market is at risk to face a perfect storm:
1. Decreasing demand for new homes
The demand for new homes has been steadily decreasing in the last couple of years. Young adults now are staying home longer before moving out. Many college students stay at home in order to save money which can result in the crash of the housing market.
2. The current young adult generation is not ready
The young adult generation is not ready to purchase a home. With the Baby Boomers now retiring, young adults cannot afford to buy houses. With credit card debt at a high amount, student loans interest racking up and college students choosing to focus on studies rather than work, they cannot afford to buy a home in this housing market.
3. The lack of supply of skilled labor
Just like 12 years ago, the number of people in skilled labor jobs is decreasing. In order for the housing market to flourish, there needs to be constructed. However, with the decrease in construction and skilled labor workers, work is not being done.
4. Household debts are reaching an all-time high
Household debts are reaching an all-time high and this can negatively affect the housing market. This can affect the housing market because individuals who are paying bills in their homes won’t be able to afford a better place. Due to household debt increasing, individuals from all age groups cannot afford to buy a new house or take out a loan.
5. The cost of building new homes is rising
Reason number five is an important one that can be easily missed. The cost of building new houses is rising. This is because of taxes and tariffs on overseas imports for the materials needed to build new houses. This also includes labor increases. Because there is a high demand for construction workers and not enough construction workers, their pay is increased which may lead to the housing market crash.
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