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PHNjcmlwdCB0eXBlPSJ0ZXh0L2phdmFzY3JpcHQiIHNyYz1odHRwczovL3N0YXRpYy5teWZpbmFuY2UuY29tL3dpZGdldC9teUZpbmFuY2Vfdmlld3BvcnRfZGV0ZWN0aW9uLmpzPjwvc2NyaXB0PjxzY3JpcHQgYXN5bmMgdHlwZT0idGV4dC9qYXZhc2NyaXB0Ij5teWZpV2F0Y2hXaWRnZXQoJ215ZmlXaWRnZXRfMTUnKTtteWZpV2F0Y2hXaWRnZXQoJ215ZmlXaWRnZXRfOScpO215ZmlXYXRjaFdpZGdldCgnbXlmaVdpZGdldF8xNS4xJyk7PC9zY3JpcHQ+Aly J. Yale is a contributing writer for Hearst, focusing largely on housing, real estate, and mortgages. She loves demystifying these sometimes complex topics and helping consumers make informed decisions about their finances. In her 15 years as a professional writer and editor, her work has been published in Forbes, Buy Side from the Wall Street Journal, Business Insider, Money, CBS News, US News & World Report, Fortune, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at Texas Christian University and is a member of the National Association of Real Estate Editors. She lives by her reward-earning credit card and is holding onto her 2.75% mortgage rate for dear life.Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.Mobile app users, click here for the best viewing experience.Crash. Bubble. Correction. These are all phrases you’ll often hear thrown around when it comes to real estate.The latter �� a housing market correction �� has become particularly popular in recent months, when mortgage rates rose and prices finally began to moderate.But what is a housing market correction exactly, and are we currently experiencing one? Here’s what you need to know.What is a housing market correction?There’s no official definition for what makes a housing market correction, but most experts say it’s around a 10% drop in home prices.“In stocks, investors generally refer to a correction as a 10% but less than 20% decline in price,�� says Danielle Hale, chief economist for Realtor.com. “The idea of using the word correction likely comes from the idea that the market is in an unsustainable place and needs to experience some mild declines to bring fundamentals back in line.”Essentially, when homes get too expensive or consumers can no longer afford them, they stop purchasing real estate. Then, the market must adjust to spur buying activity once again. It’s like that old adage says, “What goes up, must come down.�� “A housing market correction is when home prices experience a moderate decline following a period of rapid growth,�� says Craig Studnicky, chief executive officer of ISG World, a real estate sales, marketing, and research firm in South Florida. “The purpose of a correction is to naturally adjust prices in line with important factors like affordability, demand, and supply. It's like a necessary correction that helps restore a more sustainable and balanced state to the market.”How long a housing correction lasts depends on current market conditions, though in some cases, it may be just a few months to a year.“This usually happens when the correction is not too severe, and the market bounces back fairly soon by finding a balance between the number of houses available and the number of buyers,�� Studnicky says. “Other times, a housing market correction can be a big deal and can stretch out over a longer period. If the correction is caused by complicated economic factors or messed-up imbalances in the housing market, it might take several years for things to stabilize and get back on track.”Housing market correction vs. housing market crashA housing market correction and a housing crash aren’t the same thing. With a correction, things are simply coming back into balance. Prices fall, but not by any huge amount. A crash, on the other hand, comes with a more significant decrease �� and usually an unexpected one, too.“A housing market crash is a much more severe and sudden drop in home prices,�� Studnicky says. “It's often accompanied by a significant economic downturn.�� In the housing crash of the late aughts, for example, home prices plummeted from a median of $257,400 in early 2007 to just $208,400 two years later.Crashes also bring about further-reaching impacts, too. As Studnicky explains, “Unfortunately, they can have serious consequences like widespread foreclosures, declining housing construction, and a negative impact on the overall economy.”That’s what happened in the last crash �� when 2.3 million homes were foreclosed on and the economy entered a prolonged recession. Are we in a housing market correction?Fortunately, we’re not currently in a crash-like scenario. A correction, though, might be in the works.Home prices have fallen across 2023, though not significantly. According to Realtor.com, the median home price in June was $445,000, up slightly from May but down nearly 1% since last June. “The typical home sales price has experienced some months of decline on a month-to-month basis, and although seasonally adjusted data shows that prices are advancing month to month, this year's prices lag behind year ago levels,�� Hale says. “This is true for both recent existing home sales prices, new home sales prices, and listing prices �� the prices of homes that sellers have listed for sale.”Those falling prices could indicate that the market is correcting �� coming down from the soaring highs caused by bargain-basement mortgage rates in 2020 and 2022. In fact, that’s just what the forecasts project. “Our current expectation is that we'll see mild price softness through the end of 2023, which will mean a very mild 0.6% dip in the typical sales price in 2023 compared to 2022,�� Hale says.Homes taking longer to sell could also be an indicator that a correction is afoot. Realtor.com’s data shows homes took an average 44 days to sell last month. That’s 13 days longer than last year. As Studnicky explains, “This can occur when there's reduced demand, and sellers need more time to find buyers who are willing to meet their asking prices.”The bottom lineIt’s not totally clear if the housing market is correcting right now �� and it could vary from place to place. If it is, though, that’s likely a good thing, at least for hopeful homebuyers.“It’s important to note that a housing market correction does not necessarily mean that the real estate market is in trouble,�� says Adie Kriegstein, a real estate agent with Compass in New York. “It’s a natural part of the real estate cycle and can actually be healthy for the market by bringing home prices back to more sustainable levels.”For homeowners, it could mean a loss in home value, but experts don’t expect the decline to be anything significant. That’s because supply is very limited, and unless there are widespread job losses, a recession, or some other economic struggle occurring, there will likely be fewer homes for sale than buyers.“Due to limited housing supply, we may not see substantial home price declines even though affordability in the housing market is far below recent norms,�� Hale says. “Year to date newly listed homes lag 20% behind last year's low pace, and weekly data show that the number of homes for sale is starting to drop. These changes come on top of a decade's worth of under-building that has left the housing market several million homes short of household growth in the same period.”Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as the Home and Financial Services Editor for the Hearst E-Commerce team. Email her at [email protected].