Summer is in full swing and so are shifts in the housing market. Inventory continues to increase steadily and have included a helpful graphic below, a benefit to Buyers and Sellers alike.
A relevant question in today's climate - Are we in a bubble? Is addressed in the article below.
Thank you for reading as always! Please reach out with any questions or real estate needs.
- Amanda, Pamela & Jace -
Reasons Why Today's Housing Market Isn't a Bubble
Source: Keeping Current Matters - June 27, 2022You may be 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.
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
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 cause 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.
Inventory 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:
This 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.”
