Why you don’t need to worry about a housing bubble this year.
People have been asking me about whether we’re in a housing bubble more than any other real estate topic lately. That’s not for no reason; with home prices on the rise, many are worried that they’ll eventually come crashing down again. Some have even heard of a housing bubble on the news, prompting them to consider selling their houses now. That's why I'm addressing what’s truly happening in today’s market and what buyers and sellers need to know.
First, what does a housing bubble even mean? A bubble is essentially a period of artificial inflation where prices increase significantly, but when the market can no longer sustain those prices, they plummet. That’s not good for anyone, except perhaps the investors standing by to scoop up the many properties that inevitably go up for sale.
However, there’s a big difference between today’s market and the last recession. Last time, lenders gave out money to anyone who asked for it, whether or not they were qualified for loans. Nowadays, lending requirements are much stricter. Buyers need to provide all sorts of financial documents and information to get approved for a loan.
"Though increased rates have caused a shift, the market is still going strong."
Additionally, the demand for homes was different during the last recession. Speculators bought multiple properties thinking they would keep rising in value. However, then they realized that there weren’t buyers for their properties because everyone who needed a home had one. Then, interest rates began to change, and people began to lose their jobs. The supply of homes outweighed the demand for them.
In today’s market, demand exceeds supply. Builders are trying to keep up with that demand, but they can’t because of supply chain issues and population growth. Since 2010, the population has grown by 27 million people, but only around 5 million new homes have been built. Overall, the nation is around five million homes short of what is needed to create a more balanced market.
Though increased rates have caused a shift, the market is still going strong. Home prices may appreciate a little slower than they have been, but they will continue to rise.
If you have any questions about what’s going on in the market or want an accurate estimate of your home’s value, give me a call or send me an email. I’d love to help you.