Why Is It Bad If House Prices Fall?

Falling house prices cause more people to be trapped in negative equity (a situation where your house is worth less than an outstanding mortgage).

This causes a fall in spending and precludes any opportunity for equity withdrawal.

Falling house prices have a negative impact on the construction of new houses.

Will house prices go down in 2019?

“Rising mortgage rates will set the scene for the housing market in 2019,” said Aaron Terrazas, senior economist at Zillow. Even current homeowners could start to feel locked into their mortgage rates.” Zillow anticipates mortgage rates will reach 5.8 percent and home values will grow by 3.79 percent in 2019.

What causes housing prices to fall?

Housing Market Bubble Causes

The price of housing, like the price of any good or service in a free market, is driven by supply and demand. When demand increases and/or supply decreases, prices go up. So, if there is a sudden or prolonged increase in demand, prices are sure to rise.

Is the housing market going to crash in 2020?

The U.S. housing market has recovered from the 2008–09 financial crisis, with home prices exceeding the pre-collapse valuation in many areas. Despite a record bull market over the past decade, the housing market in the U.S. could enter a recession in 2020, according to Zillow.

Why do house prices increase?

2. House prices rise faster than wages. House prices rise much faster than wages, which means that houses become less and less affordable. This increase in prices led to a massive increase in the amount of money that first time buyers spent on mortgage repayments.