It’s been a housing market roller coaster the past few years with no shortage of news about record-high prices, outrageous negotiations (like all-cash deals and cars), and questions about if there’s a bubble and if it’ll burst. The pendulum swung from a buyer’s market to a seller’s market as a result of the pandemic changing people’s behaviors.

While we’ve seen the stark rise in home prices flattening out a little from 2022, this downturn won’t wholly correct itself to pre-pandemic levels.

Yes, we’re still in an affordability crisis, but it’s unlikely we will see the complete housing market tumble in 2023. Here’s why.

Homeowners are reluctant to sell. March 2023 U.S. existing home sale volumes are down 22 percent compared with March 2022, according to the National Association of Realtors. Homeowners’ motivation to sell is low because many are locked into low-rate mortgages and don’t want to give up that rate to sell and repurchase a more expensive home with a higher mortgage rate. With affordability at an all-time low, homeowners are finding ways to access their home equity for renovation projects to suit their needs better.

Credit availability is exceptionally tight, and regulators removed faulty finance products. The housing market is expected to stay strong, mainly due to the current limited credit availability. This is a significant contrast to the situation in 2008, where obtaining loans was considerably more accessible for borrowers. During that time, several unsafe mortgage products enabled individuals with low credit scores to qualify for loans, but those have since been eliminated from the market.

Mortgage delinquency rates are historically low. Mortgage delinquency — when a homeowner is late on a required mortgage payment — overall rates are low. This is because lenders aren’t lending to borrowers with low credit scores. They’re only lending to those with a pristine credit score. This means the quality of the loans is better than before, which directly correlates to default rates.

Home equity is at an all-time high, which means foreclosures aren’t coming. Homeowners have an incredible amount of home equity compared with 2008, putting them in good financial shape and allowing them to sell their property for a profit. According to CoreLogic's Home Equity Report, individuals with outstanding mortgages in the United States experienced a 7.3 percent year-over-year rise in equity during the fourth quarter of 2022.

Data from Yardeni Research shows a record amount of home equity ($29.6 trillion) in the United States. This accumulated home equity is helping homeowners avert foreclosures. Distressed sales — foreclosures and short sales — represented 1 percent of sales in January, identical to last month and one year ago.

The housing market is starved for inventory. Over the past few years, the increasing demand due to lack of inventory has been one factor driving home price appreciation. Back in 2008, during the housing crisis, many tiny home builders went out of business, and new builds plummeted. New builds started to pick up again, but the global supply-chain shortage increased the cost of construction materials and slowed the progress.

New home listings are still low, according to Realtor.com’s March Housing Trends Report, which showed new listings were down about 20 percent year-over-year in March. New listings still lag behind pre-pandemic levels between 2017 and 2019 by almost 30 percent.

Because of low inventory and high demand, a combination of things will need to happen for prices to plummet. Many markets have corrected and will start rebounding as interest rates, inflation, and the economy stabilizes. However, affordability, interest rates, supply, and other factors will likely need to combine over the next year to make home prices drop significantly.

We’re seeing homeowners access their built-up home equity through home equity investments to gain financial freedom with no additional monthly payments and no new debt while the housing market remains hotter than usual.

This column was excerpted from a blog post authored by Michael Gifford, CEO of Splitero. Read the full version here.