Bubbles. Everyone likes talking about bubbles bursting.
“This housing bubble’s gonna burst any time now!”
“Home prices are crazy. The bubble is going to burst!”
Perhaps these are statements of wishful thinking from people who peddle bad news, or from folks who have been priced out of the housing market as prices have risen.
Whatever the source, these voices of doom are not going to last, as the current situation does not indicate a bubble is truly imminent. Let’s take a quick look at the facts.
The last housing bubble back in the 2007-2008 time period was driven by multiple factors, many of which are simply not present in today’s market.
1. Mortgage Lenders are More Careful Today
Back then, it was much easier to get a home loan with a low credit score. After so many people received loans when they could not afford them, lending criteria were tightened, resulting in loans that are more difficult to get. These loans are much less likely to default because the homeowners can actually afford to make the payments.
2. Today’s Supply of Homes is Tight
Another factor that is different today versus the late 2010 bubble is the supply of homes. Then, builders had produced so many houses that there was an 8.9 month supply of homes. Houses were being produced much faster than buyers could consume them. By contrast, today, there is an undersupply, with only 1.6 months supply. As soon as homes come on the market today, they are gobbled up, and they are often bid on by multiple buyers. Yes, the price is being driven up in what some might call a pricing bubble, but the demand is so great that there should not be a reduction in demand any time this year.
3. Foreclosures Are Way Down
Looking at a third factor that is different today versus the late 2010s is the number of foreclosures. In 2009, there were over 2 million foreclosures. By contrast, in 2021, there were a mere 39,000 foreclosures. Yes, this was partly reduced by government efforts to help homeowners during the Covid crisis, but even in 2019, prior to the pandemic, foreclosures numbered only about 14% (277,520) of those in 2009.
So, looking at just three indicators, there does not appear to be a housing bubble looming any time soon.
If you’ve been waiting to buy or sell a house, thinking that a market crash was coming, consider moving ahead with plans, knowing that the market is much more solid than it was 14 years ago.
Kurzner Group can help you understand today’s market and decide how best to proceed. If you want to buy a home in Atlanta or sell your home, take a couple of minutes to connect with us to discuss your options.
