Will There be a Market Crash?

Market crashes are very hard to predict. Some of the world brightest economists didn’t see the last crash coming and only in hindsight saw the factors that led to it.

When it comes to crashes, there always seems to be two camps:

  1. The constantly negative: Unicorns could be farting rainbows and these people would still see doom and gloom everywhere.
  2. The blindly positive: Shadows and clouds could be gathering all around these people and they will still claim that everything is only going to continue to go up forever!

Obviously, both of these extreme positions need to be taken with a grain of salt. It’s possible that these pundits believe their extreme positions or other factors could be in play. Maybe they like the current political leadership and think as long as their team is calling the shots everything is going to be great.

On the other side of the coin, they could own short positions and be betting against the market. Or they could just have a new book/podcast/tv show they are promoting and want to generate some headlines.

So, how do you cut through the all of the hype and figure out if there will be a market crash in 2018 or 2019?

Let’s take a look at what some pretty unbiased sources say and go from there, shall we?

Twelve Factors of a Crash

Hey, economics is a complex subject. If it was easy, every Tom, Dick and Harry would do it! I prefer to stay in my lane and focus on what I do best while I leave the math to people way smarter than myself.

Gord Collinsput together twelve factors that many economists believe can lead or contribute to a housing market crash. They are:

  1. Excessively high home prices via a price bubble
  2. Increasing underwater mortgages
  3. Fast rising interest mortgage rates
  4. Slowing economy and sudden rises in unemployment
  5. Wage growth not keeping up with home prices
  6. Tax changes and geo-political shifts
  7. Trade deal disturbance
  8. A stock market bubble and volatility
  9. High level of consumer debt affecting debt servicing
  10. Cost of living rises
  11. Risky low rate mortgages for new home buyers
  12. High oil and energy prices

While something dramatic could happen that would throw a lot of these factors into consideration, a quick shows that we’re doing ok right now.

Yeah, we’re always one late night tweet away from a trade war or geo-political turmoil but a lot of these other factors seem to be in check. Home prices are rising but not so quickly as to outpace supply and demand. Mortgage rates are rising, but definitely not quickly. The economy is humming along for the most part and energy prices are in check.

Moving Target

Now, all of these twelve stars don’t have to align to bring about a crash. Extreme moves on a couple of these twelve factors could easily push markets that are already running hot (San Francisco, Boston, San Jose) into the danger zone.

For example, Gord Collinsfeels that San Fran is one of the most likely candidates if a couple of factors align:

In San Francisco, the risk of a bubble burst in 2018/2019 is highest and that city is ranked number 1 as highest for a crash. Prices in the San Francisco Bay area housing market are extremely high and if the tech sector does have an extended downtick with rising mortgage rates, perhaps the forecasted slide could start.

Ask a Pro

Things like the economy and housing market are constantly in flux. If you’re thinking about buying or renting and not sure if you’re making the right move, then it’s time to talk to an expert.

Jamec Blue has over $10 million in sales and with a host of happy clients; he’s the real estate professional you want to talk to. If you have questions about the health of the housing market and what your next move should be, Jamec can answer them!

Give him a call at 510-541-7489 or visit https://calpre.com/today for more information.