All the data available suggests that we are not in a housing bubble.
One of the most frequent questions that I get right now is, “Are we in a housing bubble?” Today’s market may feel similar to the 2007 market because of the high prices. However, here are two major factors that make our current situation quite different:
1. Different practices. Real estate bubbles are very rare. In 2007 the crisis happened due to a series of events and decisions that would not occur today. In 2007, homeowners got risky mortgages and had no equity in their homes. Lending standards are now much stricter, adjustable-rate mortgages are not as popular, and homeowner equity is at an all-time high.
2. Lagging new home construction. Materials and labor have gotten much more expensive recently. On top of that, the construction industry has focused more on luxury homes than starter homes. It will likely take years before supply and demand balance out again.
Today’s buyers are paying with cash and are extremely qualified, and the lack of inventory tells us that we shouldn’t expect a market bubble anytime soon. If you have any questions, don’t hesitate to reach out to me by phone or email. I look forward to hearing from you.
