No Housing Bubble to be Found

[Kevin Uzelac]

With today’s housing market conditions, the question comes up frequently whether or not we are in bubble. There are several indicators and comparable metrics that show that the market should continue to stay strong.

Loan originations are being made to those with high credit scores and sizable down payments which was the opposite of the subprime crisis. During quarantine there were people going through financial troubles. Although, there was also a large quantity of people that had nothing to do with their money but save it. No travel, dining or moving homes. This allowed people to save and wait out the pandemic for the right opportunity to buy.

The decrease in interest rates is another obvious indicator that has incentivized people to borrow. This has increased the demand for homes but the supply hasn’t been able to keep up. Many homeowners didn’t want to have strangers walking through their home with the risk of covid contamination. Also, the last housing bust caused homebuilders to slow down construction and it still hasn’t picked up to where it was in 2006.

One last indicator pointing to a healthy market is the average consumers financial picture. Falling rates, stimulus payments and some apprehension from the last crash has created stronger balance sheets. Debt service as a percent of disposable income has fallen from 13% in 2007 to around 9% in 2020-21. There is also a large increase in home equity in comparison to 2007. I’d love to hear what other people have to say about today’s booming market. There are several indicators I didn’t cover but the ones I did are easily comparable to the previous housing bubble.

The facts in this post came from an article on fortune.com: https://fortune.com/2021/04/16/are-we-in-a-housing-bubble-covid-real-estate-prices/