3 REASONS THE HOUSING MARKET IS NOT IN A BUBBLE

By
Real Estate Agent with RE/MAX Preferred Realty

With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago.

Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to attain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild.

Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash.

Where we are today…

1. If we look at lending standards based on the Mortgage Credit Availability Indexreleased monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s.

3 Reasons the Housing Market is NOT in a Bubble | Keeping Current Matters

2. If we look at new construction, we can see that builders are not “over building.”Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980.

3 Reasons the Housing Market is NOT in a Bubble | Keeping Current Matters

3. If we look at home prices, most homes haven’t even returned to prices seen a decade ago. Trulia just released a report that explained:

“When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.”

Bottom Line

Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven’t even recovered. It appears fears of a housing bubble are over-exaggerated.

 

Courtesy of Greenville NC Real Estate Expert Liz Freeman.   

Comments (2)

Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

I shared this info too elsewhere from Keeping Current Matters

May 11, 2017 07:32 AM
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Liz. This is good perspective and well communicated. Please do me a favor though and increase your font size so it can be read by older eyes.

May 11, 2017 08:20 AM

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