Here’s why you don’t need to worry about our housing bubble popping.
Are we in a housing bubble? People ask us this question all the time, and we get it. The last time prices rose this much was 2007, and the subsequent crash had major implications for our economy. However, we don’t think you need to worry about a housing bubble, and today we want to discuss why.
Our current market is nothing like it was in the mid-2000s. First, lending practices were very different back then. Anyone could get a home loan, so unqualified buyers flooded the market and purchased homes they couldn’t afford. Mortgage laws were very loose back then, but regulations in the lending industry are much stricter now. Unlike 2008, our current demand isn’t driven by bad lending practices.
Another consequence of the last crash is that builders stopped building homes. Houses became so cheap during the bubble that builders didn’t want to get burned by building worthless assets. Now that the market has bounced back, we’re still behind from this effect. According to estimates, our market needs another four million homes to meet our current demand, and we can trace this shortage back to builders holding off from the last crash. This has made prices soar, and it’s very unlikely that they’ll go down until supply catches up with demand.
Because of qualified buyers flooding the market and a shortage of homes, prices have increased like crazy. As a result, most homeowners have a ton of equity. This means that a foreclosure crisis like we saw in 2008 is very unlikely.
Some people are worried about increasing interest rates. While rising rates may slow down demand, it won’t stop the market. Rates are still good from a historical perspective. Prices may not appreciate as quickly as they did before, but they won’t be decreasing until supply and demand change dramatically.
At the end of the day, owning a home is still one of the true American dreams. Despite rising inflation, our job market remains strong, and people will always desire to own their own homes. We don’t think we’re in a bubble, so if you’re looking to buy or sell, it’s still a great time.
If you have any questions, please call or email us. We are always willing to help!