CEO of ProfitJumpstarter Keisha Bailey says a housing market crash is not likely to happen in the United States or in Jamaica anytime soon.

Speaking on Taking Stock, Bailey said despite higher mortgage interest rates causing a slowdown in home purchases, the supply of houses is still limited.

A housing crash is defined as an oversupply of homes on the market with very little demand for them because of inflated prices. 

“There is not likely to be a crash in the US because supply is still limited. There are not that many houses being built to create that crash,” Bailey said. 

“What we’re seeing is that the transactions are slowing down. A lot of open houses are being held and people are coming out, so the demand is there but there are no transactions,” she added.

Bailey said the increase in interest rates has made purchasing a home, especially for first-time buyers, extremely difficult.

“In the US, mortgage rates are now 8%. That is very high considering coming from 2008 until now we’ve been in a low interest-rate environment where it was very cheap to borrow money,” she explained.

“Coming out of the pandemic, interest rates have gone up very quickly and because of that, we’re seeing now mortgage rates being higher. The effect of that on US housing prices is that it’s become way more unaffordable for a lot of persons,” she added.

The CEO noted that it is a similar case in Jamaica, with mortgage rates peaking at 10% at some financial institutions.

However, similarly to the US, Bailey said the supply of houses on the Jamaican market is not enough to cause a real estate bubble that could lead to a crash.

“The supply [in Jamaica] is building but it’s not at a stage yet where we may see a bubble, which is what would create the burst,” she said.

Meanwhile

To help alleviate some of the pressure on home buyers in the United States, Bailey explained that real estate developers are offering assistance to potential buyers.

“The situation in the US is unique because developers are saying, ‘Hey, we’re building all these houses and affordability is becoming an issue and it’s impacting sales.’

So, they’re offering somewhat of a discount. They’re providing a rebate to the home buyers to make the housing prices a little bit more affordable,” she explained.

Bailey noted that it was a new approach to the issue and may prove successful in avoiding another crash.