This Isn’t a Housing Bubble
The United States housing market is hot with annual gains in home prices, bidding wars, and surging buyer demand. That type of housing market is prompting “bubble” fears in some corners. Economists say the housing market isn’t getting overinflated.
Lawrence Yun, chief economist of the National Association of REALTORS® stated: “This is not a bubble. It is simply lack of supply.”
However, the rapid rise in prices may be concerning to home shoppers. The median selling price for a home is up $35,000 compared to one year ago, which is the fastest-paced increase since 2006.
But buyers, this is 2021, not 2006 – housing inventories are low, credit remains tight, and lenders aren’t issuing risky loans at rates like they did back then. Mortgages with introductory periods, teaser rates, or balloon payments—comprised about 40% of the mortgage market between 2004 to 2006. More recently, those factors are now at only 2% of the mortgage market, according to Morgan Stanley.
The housing market has a record low number of homes available for sale. At the end of March, there were 1.07 million homes available for sale, according to NAR data. For comparison, during the housing bubble, in July 2007, there were more than four times that.
Still, while home prices won’t keep climbing at the current pace. They aren’t expected to fall either, they will continue to rise, but more gradually economists say.