For weeks, one central question has been on the minds of many Americans: Is a housing market crash coming?
With home prices leveling off, mortgage rates on the rise, and home sales declining in 2023, these apprehensions are understandable. Throughout the year, housing market trends have reminded experts of 2006… and the resulting market meltdown. But not everyone is concerned that another housing crash is imminent. In fact, InvestorPlace analyst Luke Lango is optimistic, predicting that investors should instead be preparing for a new bull market.
Despite all the negative headlines that investors are currently faced with, he sees better days ahead.
Where’s the Housing Market Crash? Not Happening.
Last week, Lango sat down with InvestorPlace.com to discuss, among other things, his bullish outlook on the housing market. Specifically, he laid out why he isn’t worried about it and why investors shouldn’t be either.
He quickly raised the key point that housing market crash speculation isn’t new… and no crash has happened yet. And that’s for a good reason: It isn’t going to.
“People have been talking about a housing market crash for 12 months. Where is it? Knock, knock, who’s there? It’s not there. There is no housing market crash. It hasn’t happened. And if anything, the market’s now reaccelerating.”
For example, median prices for existing home sales rose in July 2023 for the first time in five months. “Whatever housing recession there was is over,” Lango said. In his words:
“There’s no existing home sales inventory. The only inventory is on the new home side. And builders were hesitant to build in 2022 because everyone was talking about a housing market recession, so they didn’t build in 2022. They also had labor shortages and product shortages, lumber shortages. Now they’re just starting to build again here in 2023. … Demand for homes is durable. It’ll sway a little bit here and there based on economic swings and interest rates, but it’s pretty durable. [Right now] supply is very low, and based on our analysis, it is going to take a very, very, very long time to normalize supply conditions in the housing market. And until those conditions normalize, home prices are going to remain elevated.”
Lango also believes the Fed is done hiking interest rates and that mortgage rates have reached their peak, noting that 10-year Treasury yields have likely maxed out as well. As mortgage rates continue to come down in 2024, he predicts a flood of demand will be unlocked.
The Road to Reacceleration
For all these reasons, Lango thinks the U.S. housing market is in what he calls “the early innings of a massive multi-year recovery.” He notes that homebuilder stocks have been among the S&P 500’s top performers throughout 2023, and other real estate names like Opendoor Technologies (NASDAQ:OPEN) and Compass (NYSE:COMP) have been big winners. He predicts these growth trends will continue, noting that after years of construction companies underbuilding, it will take years for the market to normalize.
As he sees it, supply and demand conditions are in a good enough place to lead to rising home price appreciation for the next 10 to 15 years. This puts the economy in an excellent position for a new bull market, as inflationary trends help trigger significant rallies across many sectors.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
