Housing bubble or just supply and demand

[Kyle Ashmore]

Housing bubble or just supply and demand? We are definitely seeing a surge in housing, but it’s different from 2007.

Back in 07’, housing surged, due to bad banking lending regulations. Everyone was buying because they were scared they would miss out. Bad credit? No worries, you can buy a house! Fast forward to 2021- banks have tightened up, we are seeing less cash out refis, higher credit scores and less second homes purchases.

Should we be scared of a bubble? I would say no...but maybe a 10% correction. No more bad credit lending, but a supply and demand issue.

We're in a spot today where demand is very high and supply is very low, which drives prices even higher.

Higher construction costs exacerbate this issue. With lumber prices increasing (adding an additional 30% cost), an increase of 25% on tariffs on Chinese goods like metals, finished materials (like flooring and wall panels).

Another pricing factor is lack of builder confidence. Builders are still recovering from 2007 and are shy to go all in with building supplies being temporary over priced.

Lower interest rates are driving people to the market, which reduces the supply.

Lastly, millennials, are aging into this consumer market, influencing availability of housing by 30%.