Two Reasons Why Todays’s Housing Market Isn’t a Bubble
You probably have been reading headlines and hearing talk about a potential housing bubble or a crash, but it’s 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.
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 due to low inventory
Credit risks are low because underwriting and lending standards are more stringent and more 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
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.
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:
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 we’re not in a housing bubble. That’s because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today.
For any other questions, let’s connect and discuss why today's housing market is nothing like 2008.