Will there be a crash in the housing market? Experts' opinions on the possibility at the end of 2023.

There is little debate about how effective the Federal Reserve's tactics to combat inflation were in cooling the hot housing market during the pandemic. In February, for the first time in 131 months, home prices decreased compared to the previous year, ending the longest streak of price increases. However, the median home price rose month over month for the fourth consecutive time in May. According to data released in June by the National Association of Realtors (NAR), the median price for existing homes in May increased to $396,100, which is 3.1% lower than in May of the previous year ($408,600).

At the same time, the increased mortgage interest rates, which have doubled since the beginning of last year, are limiting the purchasing power of homebuyers. Instability in the banking sector, news of layoffs, and rising recession risks are also causing potential homebuyers to hold off on making purchases.

So does this mean that a crash in the housing market could be on the horizon? Housing experts do not believe that is the case.

"Despite the uncertainty in the economy and the housing market at the moment, there is little to suggest that the housing market is poised for a collapse," says Lisa Sturtevant, chief economist at Bright MLS. "For a sharp decline in home prices, like we saw in 2008, for example, we would need a significant drop in demand and/or a substantial increase in supply."

The limited supply of housing, combined with a strong labor market, is a factor that contributes to persistently high home prices, despite significantly higher mortgage interest rates.

“The housing market cannot compare to last year's intense spring home-buying market,” says Jessica Lautz, deputy chief economist at NAR and vice president of research.

According to NAR, in May the average time a property spent on the market was 18 days, which is lower than in April (22 days) but higher than in May 2022 (16 days). Seventy-four percent of homes sold in May were on the market for less than a month.

The limited supply of housing is due to the fact that 85% of mortgage holders are locked in at rates below 5%, which does not encourage current owners to sell their homes and buy another at the current higher interest rates.

The total housing supply at the end of May was 1.08 million units, which is 3.8% higher than in April, but 6% lower than a year ago (1.15 million). The unsold housing inventory represents a 3.0-month supply at the current sales pace, which is higher than in April (2.9 months) and in May 2022 (2.6 months).

"The offer is still very low, which will hinder a decrease in housing prices even in the event of a drop in demand," says Sturtevant.

Experts agree that even if a price correction occurs, it will not be as catastrophic as the housing market crisis of 2007-2009. At that time, mortgage lenders were issuing subprime loans to borrowers without verified income or the necessary down payment, promoting risky credit products. Currently, even with low interest rates, there are strict lending standards in place.

Swapna Venugopal Ramaswamy is a housing and economic correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and subscribe to our daily money newsletter here.