Is a Housing Bubble Forming? Experts and Data Prove No
Every industry has a market, but very few industries help drive the economy like real estate. With that, comes a lot of speculation that leads to making individuals feel a bit uncomfortable—especially when deciding to purchase a home. One reason that economists tend to analyze the real estate market is because it has a lot of factors that determine how the economy is performing.
Recently, there has been speculation touting another housing bubble may be around the corner. However, when economists and industry professionals analyze the data, key indicators reveal quite the opposite. In fact, signs that are usually present during a housing bubble are completely absent today. However, there are indicators signaling a healthy market that is moving in the right direction—even at a steady pace. What is happening now, seems to be the simple economic 101 principle of basic supply and demand.
In recent history, lending practices were extremely lenient and credit limits for homes were way too high. Basically, money was easy to get and individuals bought way more house than they could afford. Today, interest rates are low, but lenders are being more stringent and diligent when it comes to doling out cash for mortgages. The amount that lenders are allowing individuals are more realistic limits than those of the recent past.
In today’s real estate market, indications of climbing home prices are attributed to low supply. As buyers look to move or enter the real estate market, there just aren’t as many homes to purchase. This supply and demand situation has home prices moving in an upward direction. It’s simple—less homes on the market equals higher home prices. During an influx of homes on the market, allows for a great buyer’s market. This is when prices tend to be lower.
Even if you take a look at past mortgage payments, you’ll find that the market today is far from a bubble. According to the Joint Center for Housing Studies and the National Association of Realtors, the average monthly mortgage payment was $1,245 in 1990. In 2000, that payment dipped a bit to $1,184. Then during the housing bubble years of 2006, that payment grew to $1,305. Currently, the average mortgage rate is at a modest $858—up only a few hundred dollars from 2012.
So, with an indication of a healthy real estate market, you may want to think about finally deciding to make your move.
Thinking of buying or selling a home in the La Jolla area? As consistent top producers in real estate, Linda Daniels and The Daniels Group are your La Jolla housing specialists. Working with The Daniels Group will give you with the advantage of having local experts to ensure that you have a successful real estate transaction. From buying, selling and investing to financing options and more, we have the expertise and resources to help you achieve your goals. Call us today at (858) 361-5561 or email us anytime by clicking here.