Is This a Housing Bubble?

For anyone who was around in 2008, the thought of a housing bubble (and its inevitable burst) is more than a little terrifying.  Among people who are looking for a home I keep hearing stories that reflect a lot of fear.  

Are we in a housing bubble? 

Will the bubble burst?  

Is it a bad time or a really, really, REALLY bad time to look for a home?  

With widespread war stories about bidding wars, offers above asking, cash offers, and offers without contingencies it’s understandable that prospective buyers are nervous.

In fact, you’re right to be concerned; these are normal concerns whether you purchase a home in 2021 or at any other time.  For many people, a home is the single largest purchase a person or family will make.  You’re right to consider the costs, risks, advantages and disadvantages involved with such a big purchase.

The thing is that the market today in 2021 is very very different than the market back in 2008.   Even though prices in 2021 have continued to rise all across the country economists aren’t worried.  In fact, experts remain steady: this isn’t a housing bubble and it is not going to ‘burst’ like 2008.  Prices are rising – yes, it’s true.  But that alone doesn’t equate to a bubble; in this case what goes up doesn’t necessarily have to come down.

What is the difference between the housing bubble then and where we are now?

Back in 2008, mortgage lenders were doing all sorts of sketchy things to get people into a home.  Remember?  It even had a name – the subprime lending crisis.  Today, you’ll find that the underwriting process is a LOT more strict! In 2008 lenders were getting people into homes by allowing them to finance way too much; they were using adjustable rate mortgages with balloon notes and not verifying all sources of income (balloon inflates). Over time the mortgage payment increased and given that the home values dropped, refinancing was not an option; borrowers found themselves underwater (balloon bursts).  It was a major contributor to the Great Recession.

Not only that, but there was a wealth of inventory available then; today part of the problem is a supply and demand issue.  There are more people who want homes than there are available homes to put them in.  So, there’s more competition for the available homes, which in turn drives up prices.  

Most people are not that interested in economics, just in how these factors affect their bottom line, right?  You’re not on my page to study market trends; but to analyze the situation and decide about purchasing a home in Hampton Roads.  To summarize: although home prices are rising across the country, this is NOT a housing bubble like we saw before; lending practices have improved and the increase in price is related more to supply and demand issues.

How much have home prices risen?

According to the S&P CoreLogic Case-Shiller Home Price Index, home prices increased 19.7% from July of 2020.  That makes four consecutive quarters of record growth, and this is consistent in major metropolitan areas across the country.  It’s definitely not just in Hampton Roads, though we’re certainly seeing these same trends.

Will home prices go back down anytime soon?

I’m not a fortune teller so it’s impossible to say anything with 100% certainty.  In general, expert analysts and economists think that because this isn’t a bubble, the price rises are here to stay.  There may be smaller dips over time that correspond with normal market activity, but no one is predicting a crash.

In fact, most seem to think that home price growth will remain in the double digits throughout 2021.

Is now a good time to buy a home in Hampton Roads, or should I wait it out?

I often say that the best time to buy a home is when it feels right for you!  Market trends are one thing, but you can’t sit on the sidelines waiting for the perfect time to enter the market.

Sure, we’ve seen some challenging things in 2021, but it’s definitely not a bad time to buy a home!  In fact, I’d argue that I have successfully represented many buyers this year which indicates it’s quite the opposite.  If you get into a home now you’re well positioned since most experts agree home price growth will stay steady through 2021.

In fact, the National Association of Realtors released a report that revealed its expectation that home prices would continue to climb 5.5% in 2022.  Maybe not double digit numbers, but, still – nothing to turn your nose up at!

The bidding wars and craziness we saw in early stages of 2021 seem to have calmed and inventory is increasing.  Additionally, interest rates are at record lows which means mortgages are more affordable now than at other times in history. Even with the increase in home prices you still have better buying power when the interest rates are low. Think about that.

If you’re ready, you can afford it, and it’s time to buy then don’t let concerns keep you from searching.  There are a lot of advantages to homeownership.  Despite what you may have heard now is a great time for homebuyers!

I can help you.  If you’re interested in checking out some of the amazing housing opportunities available in Hampton Roads, from beautiful gated communities to quirky hundred year old homes, we will find the perfect home for you and your family.  For more information, give me a call at 240-381-5596.