Real Estate Tips: How to Tell That Today's Market Isn't a Housing Bubble
/You may be thinking that this softening that we are seeing in the housing market is leading to a crash, like we saw in 2008. Well actually, this is a healthy easing of this insane market that we’ve been experiencing. We are unlikely to see the same type of crash happen again because lending standards have tightened up since 2008, and there is still a surge of homebuyers who are unfulfilled due to lack of inventory. If you are weary of the current state of the market, you can read more about this below:
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 causes 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.
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.
Purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash.
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 a local real estate professional to discuss why today’s housing market is nothing like 2008.
Source: Keeping Current Matters
