Will there be a housing market crash in 2021? A majority of experts think not.
"People are saying we're in a housing bubble, but I don't think the term housing bubble is the right description," said Tabitha Mazzara, director of operations at mortgage lender MBanc. "A bubble is something that's going to pop. I look at it as a phase. The market is cyclical, and there may be some slight correction, but it won't be nearly as bad as what we saw in 2008. What's different today from what we saw in 2008 is that people who are qualifying for loans are actually qualified. They are creditworthy. We're in the situation we are now because of simple supply and demand."
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Erik Wright of New Horizon Homebuyers has a similar take. "Personally, I think the factors influencing our current market are much different than in 2008," he said. "I am expecting the market to begin to cool off but for it to be more of a plateau than a crash. However, I am always looking for how I can be prepared just in case something drastic happens and we do experience a real estate crash."
So what should you do if you're planning to make moves in the current housing market? What's the answer?
"Trying to prepare for a possible real estate crash, is sort of like trying to prepare for a possible house fire," said Clay Risher, investment professional and column writer for Nareit, a trade publication for commercial, residential and mortgage-backed real estate investment trusts. "All you can do is mitigate risk as much as possible and hope for the best."
Whether you're looking to stay put, sell, buy (or sell and buy), here's advice from seasoned industry experts to help you avoid negative effects from a possible housing market crash in the future.
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Advice for Homeowners Who Aren't Looking To Sell
If you aren't looking to sell your home, you may be wondering if you should consider refinancing your home to save money over the life of your mortgage loan. Here's what industry experts say.
"If you already own a home and aren't planning to sell, you should still refinance now for incredibly low rates, allowing you to sit tight and weather any storm that hits the market," said Dawn Pfaff, president of My State MLS, a nationwide MLS and referral network.
Peter Murray, owner of Murray Steel Buildings, a residential and commercial construction company, seconds Pfaff's opinion. "Even if you've purchased your home in the past few years, you should spend some time looking at refinance mortgage rates. The past 12 months have brought out mortgage financing rates that are lower than they have ever been. Depending on your financial standing, you might be able to refinance at a rate around 2.5%-3.5%, which could save you tens of thousands of dollars if not more within a 30-year mortgage. It doesn't hurt to shop around on refinance quotes - I'd recommend looking at at least three different providers and comparing rates."
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Advice for Homeowners Considering Selling
Perhaps your home's value has temporarily escalated due to the current market and you're tempted to sell it now to reap the profits that won't be available forever. Here's what the experts say.
"If you're considering selling within the next few years, now is the time; the market is hot, interest rates are low, and you'll get the best offer for your home," Pfaff said.
"If you are a property owner who is considering selling their property to take advantage of the high sale prices, remember that selling high also goes along with buying high," Reiner said. "It is best to secure your next living situation before putting your house on the market to avoid being stuck."
One way to sell your home without having to buy another one immediately is to rent until the market settles down. In the interim, consult with a financial advisor and tax professional to find out the best way to handle the profits you gain from the sale of your home.
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Advice for Prospective Homebuyers
If you're planning to buy a home, Murray recommends avoiding overpaying if possible. "It goes without saying that the housing market is extremely competitive currently, with many homes for sale receiving 10-25 cash offers," he said. "This generally means that you'll be overpaying in order to stay competitive. If you're looking at the house of your dreams, then it might be worth overpaying in order to get your offer accepted, but if this isn't your forever home, by overpaying you'll immediately be in the hole in terms of equity once the market eventually evens out."
Eric Jeanette, owner of Dream Home Financing and FHA Lenders has a similar perspective:
"If you are a home buyer, then consider waiting before you purchase," he said. "Rent for a year and watch the market if you are concerned about buying a home only to watch its value fall during a market correction. However, if you are buying a home that you plan to live in for the next 20+ years, then today's purchase price really should not be a concern. Just buy the home you prefer to live in today."
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Overbuying is risky, and a way to avoid overbuying is to take Pfaff's advice. She believes that you should create a strict homebuying budget before you go home shopping and stick to it to avoid overextending yourself financially.
Although that might mean you won't end up buying a home right now, you always have other options, such as refinancing, renting or simply staying in your current living situation until the market stabilizes.
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Last updated: Aug. 4, 2021
This article originally appeared on GOBankingRates.com: Should You Prepare For a Housing Market Crash in 2021?