Are We In The Middle Of Another Housing Bubble?
Friends and clients,
In June of this year, home prices rose for the 50th straight month.
Nationwide, current home prices are only about 1% below record highs from 2006, the beginning of the housing crisis.
At the same time, mortgage rates are trending lower and lower. The average 30-year fixed mortgage rate is now just 3.49%, only a few points above the all-time low of 3.31%.
Put these two things together, and you've got many people wondering: Are we in the middle of a new housing bubble?
The rise in home prices over the past several years is undeniable, and so are the low mortgage rates.
But let me set your mind at ease. The situation today is very different from the housing bubble that happened 10 years ago. Here's why:
1. Lending has been cleaned up. The risky mortgages that fueled the housing bubble 10 years ago aren't happening today because of new laws like the Dodd-Frank Act.
In fact, the stricter regulation surrounding lending is one of the reasons why mortgage rates are so low right now. Since banks have tighter criteria for the lenders they approve, they can afford to lend money at a lower rate.
2. The current level of new home construction is below historical averages and is only a fraction of the level from 2006.
It’s the opposite of what we would expect in a bubble: homebuilders are simply not finding it profitable to build new housing right now.
This shortage of new housing also explains the high prices that existing homes are selling for.
In other words, demand is higher than supply right now.
This means that it’s a great time to sell. If you’re curious what your home is worth in the current market, check out this calculator which takes into account recent Austin sales:
So is the current situation a housing bubble? No, far from it.
The big housing crisis 10 years ago was set off by speculation and loose borrowing—we're not seeing either of those things right now.
Instead, what we are seeing is a shortage of certain kinds of homes on the market, which has increased the level of home prices.
However, thanks to the low mortgage rates, those homes are actually affordable.
If you're considering buying a home, there are a lot of great homes in the Austin area that have recently entered the market:
In short, the current real estate market is in great shape and looks fundamentally different from the housing crisis 10 years ago.
And if you’re thinking about selling your home or buying a new home, just give me a call at (512) 212-1221. I’m here to help.
Have a great day.
Until next time,
6850 Austin Center Blvd. Bldg 2, Ste. #320,
Austin, TX 78731