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Two Reasons Why Today’s Housing Market Isn’t a Bubble

Friday, July 1, 2022   /   by Laura Larson

Two Reasons Why Today’s Housing Market Isn’t a Bubble

You 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. 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. 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 Rising
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.

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. There is a big difference between 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.
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 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. If you have questions, connect with Laura Larson now to discuss why today’s housing market is nothing like 2008.
Larson Fine Properties
Laura Larson
7294 Joffa Circle
Warrenton, VA 20187
703-743-4410

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