The housing market is still affected by the crash of 2007. In the eleven years since then, the world of real estate has changed. Lenders are more cautious. Builders aren't willing to put up hundreds of houses without buyers. Consumers, particularly the Millennial Generation, are well aware of what it means to lose a home, even if they didn't lose a house themselves.
What is the new normal?
In September, Realtor.com revealed that home inventories were flat for the first time in years. For a long time, inventory hasn't kept up with demand. There were many more buyers on the market than homes for sale. In September, the difference was tiny, just 0.2%. That means that for the first time in a long time, there were as many homes put on the market as there were buyers to purchase them.
Part of the new normal is reasonable loan requirements and somewhat cautious lenders. It's not like it was right after the housing bubble burst, where almost no one could get a loan. Now, with good credit, you can get a mortgage at a reasonable rate.
Builders are putting homes on the market. They aren't building like they did in 2005 and 2006 when there was a glut of homes for sale. We will see builders still being cautious about how much they build so as not to be stuck with a ton of inventory if the markets softens.
Home prices are leveling off. There will always be a change for inflation, but the prices aren't climbing as fast as they have been over the last few years.
Interest rates on loans are likely to increase more, but only a bit. If the housing market cools off, the Federal Reserve will probably keep interest rates where they are.
The first real unknown in this market is Millennials. This is the largest generation since the Baby Boomers and they are savvy and skeptical. They watched the entire country drop to its knees because the housing and banking industries had gone insane. They see a mortgage, not as a door to liberation, but as a necessary step to survival.
The next unknown is the response of lenders to the new employment numbers. We have record employment and a solid housing market, but there is not the rush to buy homes there was after World War II when we saw this level of employment. Everyone, not just Millennials, are still holding on to see how this all turns out.