Are We In Another Housing Bubble?
3 Reasons Why We Are NOT
Posted: February 25, 2021 by Gayle R. Webster
Home values appreciated about ten percent in 2020, and they are forecasted to appreciate by about five percent this year. Some voicing concern that we may be in another housing bubble, like the one before the great recession a little over a decade ago. Here are three reasons why this market is different, even opposite.
1. This time, housing supply is extremely limited
The price of any market item is determined by supply and demand, our supply is low and demand is high, and so prices have naturally increased.
2. This time, housing demand is real
During the mid 2000's bubble the demand was manufactured. People got caught up in the fake frenzy believing that prices would continue to increase at an unrealistic rate, and this was bolstered by the predatory mortgage industry of the time, handing out unstated loans like party favors.
3. This time, households have plenty of equity
On the last go-round people were doing a lot of cash-out refinancing, depleting the equity in their homes. Seems banks and homeowners have learned their lessons on this front, and today Americans are equity-rich. 56.7% of all homes in this country have a MINIMUM of 50% equity.
Interest rates + housing supply is at a historic low. Demand is real and rightly motivated. Even if there were to be a drop in prices, homeowners have enough equity to be able to weather a dip in home values.
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