Difference Between Real Estate Crash and Real Estate Correction
Thursday Jul 13th, 2017
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Despite a number of people throwing down the terms “correction” and “crash,” not a lot of people know what these terms mean. Just so we’re all on the same page, we thought we’d put together a quick guide. This way you millennials will understand what all of those old bears mean (or if they’re just making s**t up).
What Is A Real Estate Correction?
A real estate correction is relatively minor drop in the market. The market is in correction territory when the home price index falls not more than 10% from the highest price within a year. Corrections happen with greater frequency than you might expect, and are generally good for balancing market demand.
What Is A Real Estate Crash?
A real estate crash is much less common than the media would have you think. When the home price index falls by more than 10% from the 52 week peak value, you’re experiencing a crash. Crashes are relatively rare, and are usually accompanied by a strong decline in economic macros. Strong declines in macros are also known as recessions.
By the way: (In August 2016, Vancouver saw a correction that was triggered when prices hit a peak of $933,100. The market saw a 4% decline shortly after, with prices re-tracing to an all-time high after hitting a bottom of $896,000. The last crash was seen in June 2008 when prices hit a peak of $570,100. Prices declined afterwards, hitting a bottom of 490,600 – 13.94% lower. Data Source: REBGV.)