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Two Reasons Why Todays Housing Market Isn't a Bubble

By
Real Estate Agent with HomeSmart 0561240

Two Reasons Why Todays Housing Market Isn't a Bubble

You may be reading headlines and hearing talk about a potential housing bubble or a crash, but its important to understand that the data and expert opinions tell a different story. A recent survey from Pulsenomics asked over one hundred housing market experts and real estate economists if they believe the housing market is in a bubble. The results indicate most experts don't think that's the case (see graph below):

TwoAs the graph shows, a strong majority (60%) said the real estate market is not currently in a bubble. In the same survey, experts give the following reasons why this isn't like 2008:

  • The recent growth in home prices is because of demographics and low inventory
  • Credit risks are low because underwriting and lending standards are sound

If you're concerned a crash may be coming, here's a deep dive into those two key factors that should help ease your concerns.

1. Low Housing Inventory Is Causing Home Prices To Rise

The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.

As the graph below shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there's still a shortage of inventory, which is causing ongoing home price appreciation (see graph below):

TwoInventory is nothing like the last time. Prices are rising because there's a healthy demand for homeownership at the same time there's a limited supply of homes for sale. Odeta Kushi, Deputy Chief Economist at First American, explains:

The fundamentals driving house price growth in the U.S. remain intact. . . . The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high.

2. Mortgage Lending Standards Today Are Nothing Like the Last Time

During the housing bubble, it was much easier to get a mortgage than it is today. Here's a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the years after:

TwoThis graph helps show one element of why mortgage standards are nothing like they were the last time. Purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash. Realtor.com notes:

. . . Lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure.

Bottom Line

A majority of experts agree were not in a housing bubble. Thats because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today. If you have questions, lets connect to discuss why todays housing market is nothing like 2008.

 

 

 

 

 

Posted by

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“YOUR Rock-Solid Choice Realtor for Making Home Sellers a Profit & Home Buyers Equity”

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Wayne Martin
Wayne M Martin - Oswego, IL
Real Estate Broker - Retired

Good morning Shayne. No time for panic with interest rates still at historic lows and lenders actually underwriting loans! Stay calm and carry on! Enjoy your day.

Jul 08, 2022 05:23 AM
Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH
CRS

Thanks for sharing Shayne, great information!!!

The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.

Jul 08, 2022 05:35 AM
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Those are the two main reasons that I point to when someone asks me about a housing bubble.

Jul 08, 2022 05:50 AM
Carla Freund
Keller Williams Preferred Realty - Raleigh, NC
NC Real Estate Transition & Relocation 919-602-848

Thank you for sharing Shayne. It is easy to recall what happened in 2008 and point to a housing bubble. However, the data doesn't support it. It is actually a great opportunity for buyers now that things have leveled out a bit and aren't as crazy as they were.

Jul 08, 2022 05:59 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.   Thanks for sharing and enjoy your day!

Jul 08, 2022 06:01 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Thank you for sharing the information. Buyers and sellers in your area will benefit from your expertise. Wishing you continued success.  Have a wonderful day and sell a house.  bill

Jul 08, 2022 06:03 AM
Doug Dawes
Keller Williams Evolution - 447 Boston Street, Suite #5, Topsfield, MA - Topsfield, MA
Your Personal Realtor®

No need to panic. People buy houses in all kinds of markets Shayne Stone. We happen to be in an up cycle and as in all businesses there will be a down cycle

Jul 08, 2022 08:07 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Shayne Stone and interesting blog to share with us here in the Rain.  Always learning from others here!

 

Jul 08, 2022 08:53 AM