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Is There Going To Be A Housing Market Crash In 2023?

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If you’re waiting for a housing market crash or a price adjustment to make your dream home more affordable, the data shows you’re not alone.

September single-family home sales fell to a seasonally adjusted annualized rate of 4.22 million units, 0.9% slower than the 4.26 million units sold in August.

In another staggering statistic, last month single-family home sales were down a whopping 23% from September 2021. data Published by the National Association of Realtors.

Also read: Will home ownership soon be a thing of the past? Strategies millennials are using to enter the real estate market

This means more potential buyers are waiting for interest rates to fall (currently at 7.08%, the highest in 20 years), or some sort of collapse in the housing market, similar to the 2008 mortgage crisis. means that

But not so fast — have you ever heard of the “value paradox”, also known as the “diamond and water paradox”?

The paradox of value is the contradiction that diamonds command a higher price in the market because water is much more useful than diamonds overall, even though water is much more useful than diamonds.

Michael Ashtonsaid an investment manager at Enderling Investments. Barons The current housing market resembles a value paradox, he says.

“If you have the same amount of real assets, like a house, and you have more dollars, those dollars will be worth less, and the house will control more dollars, so house prices will go up.”

Since homes are real assets, a decline in M2 (a measure of the money supply that includes cash, deposits, and stocks in retail money market mutual funds) will be necessary before a crash occurs, Ashton said.

Even with the much slower growth rate, M2 is still very close to its record high, up 1.7% year-on-year in early October.

While some analysts predict a 20% decline in house prices over the next year, monetarist theory posits that price and volume are the money supply multiplied by the velocity, or the pace at which money is spent. is equal to

Therefore, the 20% decline economists expect would require a 20% decline in the money supply, all other things being equal. According to Ashton, it’s highly unlikely.

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