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There are growing concerns that the US housing market could crash in 2024. A property investor has even predicted a Black Swan event will ‘rock the housing markets’ because of affordability pressures.
The volatility of the housing market, which has seen a combination of elevated housing prices and high interest rates, could lead to a crash in the housing market in the very near future, an expert has warned.
Real estate investor thinks a Black Swan event ‘rock the housing markets’
Sean Terry, a former US Marine and founder of the real estate investing company Flip2Freedom, recently said on the podcast Real Estate Disruptors that high interest rates and housing prices could lead to the Black Swan event.
“How do you make housing affordable? If you have to raise interest rates,” Terry said. “The prices have to come down. Something will crack, and I think…we’re gonna have a Black Swan event probably in the next six-eight months…that’s going to rock the markets.”
Terry reportedly highlighted the Federal Reserve’s efforts to reduce levels of inflation as what could push the housing market toward a Black Swan event.
“I think they’re on this path to continue to raise because they want to crash the market. They want affordability to come out,” he said.
The real estate investor also compared the current market to 2006 and what led to that housing market crash. “Look where we are at now,” he said in a TikTok video. “We are in a massive bubble, and I believe it’s going to pop. It’s got to pop, and it’s coming soon, next 12 to 24 months.”
What does a Black Swan event mean?
A Black Swan event is a term often used in finance and refers to an unpredictable or unforeseen event that typically has extreme consequences.
It is usually a high-impact event that is difficult to predict under normal circumstances. However, in retrospect they appear to have been inevitable. They are difficult to prepare for but are often rationalized with the benefit of hindsight as having been unavoidable.
According to sources, the term was popularized by the book, The Black Swan, by Nassim Nicholas Taleb. It is said, ‘Black swan events can cause catastrophic damage to an economy by negatively impacting markets and investments. However, even the use of robust modeling cannot prevent a black swan event.’
An recent example would be the crash of the US housing market during the 2008 financial crisis.
Why the market could crash in 2024
The Federal Reserve is reportedly trying to gear the US economy towards a ‘soft landing’. This is an attempt to curb inflation without causing a spiralling recession.
However, according to Investor Place, there are three signs that the housing market could crash in 2024. The outlet states that a recession later this year, coupled with a cooling jobs market and a reinflation of the housing bubble, could all contribute to a catastrophic Black Swan event next year.
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