We all know that the housing market is hot right now. Some might even call it a “frenzy.”
Houses in this market are selling in record speed, often for well over asking price, and appreciating at levels that far exceed historic norms. There doesn’t seem to be enough houses for buyers to choose from. All of these factors lead some people to worry that the housing market is in another bubble. People think back to the early 2000s and wonder if it all is happening again.
However, if we take a close look at the current situation and compare it to the situation in the early 2000s, it becomes clear that this market is very different and we can act comfortably in the assurance that this housing market is not in a bubble.
Keeping Current Matters just published “Three Reasons the Market is Not in a Bubble.” The article explains how, unlike the current market, the market in the 2000s was artificially propped up by lenient lending standards. Those standards created a snowball effect that led to skyrocketing prices, an increase in demand for housing and for home builders to overbuild. All of which eventually led to the housing crash.
This is not what our market looks like today. According to the Mortgage Credit Availablity Index, lending standards are much more conservative than they were in the early 2000s. Further, home builders are not “overbuilding.” In fact, construction of new homes are at the lowest levels going all the way back to 1980. So we know that the market is not going to get flooded with homes that will sit empty. And finally, homes in most cases have not yet even returned to the prices they were a decade ago. According to a Trulia report cited in the Keeping Current Matters article “When it comes to the value of individual homes, the US housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.”
All this to say that housing bubble fears appear to be unfounded and you should feel confident participating in the market. For all the details, check out the full article here.