ARE WE IN A HOUSING BUBBLE?

The “warning signs” look all too familiar.

Escalating home prices have both buyers & sellers worried that the market is just “too good to be true,” and agents across the U.S. are getting bombarded with the ultimate question: “Are we in a housing bubble?”

Let’s take a look at 3 key factors that suggest we’re not, so you can educate your clients and calm fears in your market.

PART 1: HOUSING SUPPLY

Last year, home values appreciated an average of 15% across the nation. And while this year’s growth isn’t expected to match it (experts are so far predicting closer to 6%), buyers and sellers are still worried that home prices are too high and that depreciation is likely to follow.

However, unlike the Housing Bubble years of the mid-2000s, the major factor driving up home values is that we’re also in a dire inventory shortage.

A balanced real estate market’s inventory sits around 6 months. Today’s current market is at 1.9 months, a historically low amount of homes for sale. On top of that, inventory has slowly been declining for years now: we’re currently sitting at less than 2 months.

In comparison, the inventory level from 2005 and 2007 increased from 5 months to 11 months, a vast over-supply of homes that did not warrant the price appreciation that went along with it.

So, throwing it back to your high school economics class, the biggest driver of price appreciation is a simple case of supply and demand, hence what we’re seeing in the market today.

PART 2: HOUSING DEMAND

If you remember the housing boom of the mid-2000s, you know how crazy that time was in real estate. But if Robert Schiller, a fellow at the Yale School of Management’s International Center for Finance, could sum it up in one phrase, it’s this: irrational exuberance.

In other words, the buying and selling frenzy that contributed to the market collapse was fueled not by tactful, financial decisions but a country-wide case of FOMO (fear of missing out).

The mortgage industry fed into the frenzy, making it easy for people to obtain home loans much higher than they could afford.

Today’s real estate demand, however, is a very real thing. And lending standards have become much tighter since before the crash.

Plus, with escalating rent happening across the U.S., many Americans are opting for the financial stability that homeownership offers.

These factors, coupled with low mortgage rates, make purchasing a home today a good financial decision. So, not only is the demand very real, it’s also very smart.

PART 3: EQUITY

Following the housing and economic crash of 2008, economists, financiers, and real estate industry experts have combed through data to figure out why the entire system crumbled the way it did.

Most will agree that one of the biggest pieces of that catastrophic equation came down to this: equity. Or in reality, a lack of it.

The mid-2000s saw a massive wave of homeowners cashing out the equity in their homes. In short, they were using their homes like ATMs to afford some of the finer things in life.

This led to a lot of negative equity situations: where the amount someone owed on their home was far more than what their house was worth. Many foreclosures and short-sales followed, depreciating home values nationwide.

Today is a much different equity picture. Cash-out refinance volume over the last three years is less than a third of what it was compared to the three years before the crash. Plus, escalating appreciation meant that homeowners gained an average of $56,700 in equity in 2021 alone. As prices continue to rise, equity will too.

This positive equity perspective puts the current housing market in a much stronger place, minimizing risk of foreclosure and stabilizing home values across the U.S.

BOTTOM LINE

The most important role of a real estate agent is to be the educator to their clients.

What that really means is analyzing data and insights, getting all sides of a story and then being able to communicate that so your clients can make the best real estate decision.

At the end of the day, knowledge is the most powerful tool you have in your business. Use it every chance you get!

And while you’re at it, download our free eGuide, How to Succeed in a Changing Real Estate Market, where we break down the best way to guide your clients through today’s challenges. That way you and your clients can navigate any shifting housing market.

What are your thoughts? Are you considering a sale or purchase? Each situation is unique and The Caton Team is happy to be of service. How can we help you?

SOURCE

We love what we do! –

How can The Caton Team help You?

The Caton Team loves what we do and would love to help you – please enjoy our resources below and get to know our team at through our clients words.

HOW TO SELL | HOW TO BUY

How can The Caton Team help You?

Get exclusive inside access when you follow us on Facebook & Instagram

HOW TO SELL during COVID-19 – HOW TO SELL – HOW TO BUY during COVID-19- – HOW TO BUY – MOVING MID PANDEMIC – TRUST AGREEMENTS and HEALTH CARE DIRECTIVES – OUR TESTIMONIALS

Got Real Estate Questions? The Caton Team is here to help.

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

Want Real Estate Info on the Go? Download our FREE Real Estate App: Mobile Real Estate by The Caton Team

Berkshire Hathaway HomeServices – Drysdale Properties

DRE # |Sabrina 01413526 | Susan 01238225 | Team 70000218 |Office 01499008

The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

PART 1: HOUSING SUPPLY

PART 2: HOUSING DEMAND

PART 3: EQUITY

BOTTOM LINE

We love what we do! –

How can The Caton Team help You?

Share this:

Like this:

Published by

The Caton Team - Realtors

Leave a Reply Cancel reply