“Prices have to come down eventually.”
“They can’t keep going up forever.”
“The bubble will inevitably burst.”
You do not have to look far these days to find someone equating the current housing market to the housing bubble that burst 15 years ago. Consumer beliefs are no substitute for facts and data. The following data points point to the conclusion that we are not in a bubble.
1. Homes Are Still Affordable
The affordability formula – the price of a home, wages earned by the purchaser and the mortgage rate – point to homes still being affordable. Yes, home prices are rising, but the average wage earner can still afford the typical home without spending more than 28% of their gross income on their mortgage payment.
2. Mortgage Standards are More Stringent
Measures put in place after the 2008 crash have resulted in fewer “high credit risk” borrowers being approved for mortgage loans.
3. Foreclosures Are Down Significantly Compared to 15 Years Ago
The burst housing bubble left millions of foreclosures in its wake. According to the NY Fed, there were 38,040 foreclosures in 2021 compared to 2,037,940 in 2009. Even factoring in the mortgage forbearance program in 2020 and 2021, foreclosure numbers are nowhere near where they were in the wake of the housing crash.
4. Inventory is Not Keeping Up With Demand
There was a surplus of homes on the market in the wake of the crash, resulting in plummeting home values. Today, inventory is struggling to keep up with consumer demand, resulting in increasing home prices.
The Bottom Line
The facts and data underline the fact that we are not in a bubble; we are in a highly competitive housing market. Having an experienced local realtor can make all the difference as you look to sell or purchase a home.
