3 Reasons The Housing Market Is NOT In A Bubble

Dated: 05/12/2017

Views: 298

See the complete blog by clicking HERE


Where we were 10 years ago:

With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago. 

Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to attain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild.  

Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash. 


Where we are today… 

1. If we look at lending standards based on the Mortgage Credit Availability Index released monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s. 

2. If we look at new construction, we can see that builders are not “over building.” Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980. 

3. If we look at home prices, most homes haven’t even returned to prices seen a decade ago. Trulia just released a report that explained:“When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.” 


Bottom Line 

Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven’t even recovered. It appears fears of a housing bubble are over-exaggerated.

Michelle O. Smith

Michelle Smith has lived and worked in both the Fredericksburg and northern Virginia areas for years, and her family has resided in the Fredericksburg area for generations. Before becoming a real esta....

Want to Advertise on this Site?

Latest Blog Posts

Ask If Your Listing Agent Does This

One of my biggest pet peeves about seeing other listings is looking at the photos and discovering that they have been taken by a cell phone.  Yes, the cameras on these devices are pretty.

Read More

Holiday Events In Northern Virginia

If you are looking for holiday activities for your weekends in November and December, in or near Loudoun County, here is a list for you: http://www.novahomemarket.com/contractors-events-more

Read More

September 2017 Market Update For Loudoun County

The following analysis of the Loudoun County, Virginia housing market has been prepared by George Mason University’s Center for Regional Analysis. It was prepared for the Dulles Area Association

Read More

September 2017 Market Update

The following analysis of the Loudoun County, Virginia housing market has been prepared by George Mason University’s Center for Regional Analysis. It was prepared for the Dulles Area Association

Read More