Are We In A Housing Bubble
Let's discuss the question, are we in a housing bubble? But first, a brief history. The housing crash of 2008 was largely created by lenders lending to borrowers that couldn't pay their mortgage. Prices were high and unsustainable, due to the loans that could not be repaid. In addition, most borrowers had little to no equity in their homes. So, the market bubble burst. Remember though, housing bubbles are actually quite rare. I know, they seem super common, right? That's because the last one was just a few years back. However, that one was specifically caused by events that will not be repeated anytime in the near future.
This current market is not the result of easy lending. So, what is going on? We've had historically low mortgage rates over the past few years. These rates had many renters rethinking that choice and deciding to become first time home buyers. In addition, many homeowners have decided to move up to a larger home because of the rates, some of them keeping their homes as investment properties.
That being said, more people have also decided to invest in real estate. The current demand is simply overwhelming the current supply, driving up those home prices. So, why do people think we're in another bubble? Likely because of the short supply and fact at home prices are rising faster than salaries are.
However, the experts are saying there is no housing bubble. Experts believe that it is unlikely for home prices to fall, but that they will simply continue to rise more slowly, but still at a rate that outpaces inflation. Here in Fairfax County, single-family homes have risen more than 14 percent year-over-year. That pace is unlikely to continue. This rise has created large equity for most borrowers. This positive equity perspective puts this current market in a much stronger position than we were in 2008.
Experts are looking at the real facts that millennials are placing more importance on owning their own homes. Some experts believe that prices are unlikely to drop within the next five years. Yes, years! They also believe that before that happens, we will see a shift in the market. There will be more sellers, and eventually, they'll even out the market between buyers and sellers. If you are thinking about buying, don't delay! Call me, I would love to discuss your options. If you are waiting for home prices to drop, you might be renting for a very long time.