Are We In A Housing Bubble?
Everyone who knows that that I am a real estate agent has been asking me the same question….Are we in a housing bubble? To answer, I have gathered statistics and information from Lawrence Yun, Chief Economist for NAR and Ward Morrison, President of Motto Mortgage Franchising, LLC.
Currently housing is still a hot commodity with low available inventory combined with heavy demand. As a result, prices are rising at an impressive rate. The average increase has been 3-5% per year but 2021 has been a monster year at just about 20%!
Many are wondering when will it stop or is the bubble about to burst or will it level out to become the new normal? There are 3 main factors that we can look at to answer this question, They are appreciation, interest rates and the number of foreclosures pending.
Continue reading or watch my video on the topic here:
As mentioned above, we are at an all time high when it comes to appreciation in home values. Typical annual rates are between 3-5% but we are at 20%. The question is, will this continue or will prices come down. Both Lawrence Yun and Ward Morrison, agree that they expect to see a lesser rise in appreciation in 2022 as opposed to seeing prices decrease. I agree and have been saying the same thing so it is good to hear other experts hold the same opinion.
2) Interest Rates:
For Most of 2021, we have been at an all time low when it came to interest rates and just recently we saw rates rise. Ward Morrison, President of Motto Mortgage, LLC. expects to see rates rise to just over 4% in 2022. It would be a good time lock in rates now if you plan on purchasing in early 2022.
Many believe that due to the forbearance moratorium ending, there is concern that they may be tons of foreclosures hitting the market. The numbers actually tell a different story. Here are some statistics to note:
35% of all homes in the US have no mortgage on them. 63% have positive equity and only 2% are have negative equity or are “under water”. What does this mean? There would only be a very small amount of homes that would make it to foreclosure and they would get absorbed very quickly since there is so much demand for housing. Also note that the number of homes in forbearance is going down steadily, as there is now a surplus of available jobs. The numbers also show that there were 5 million at the peak of the pandemic however, now we are down to 2 million and a further drop to 1 million is expected.
Based on all of the above data it is likely that we will see some easing of the inflated prices of homes in the marketplace, however a crash is very unlikely. If you are planning to purchase between now and early 2022, I would advise that you get with your lender and lock in your rate now as there is a very good chance that interest rates will go up come 2022. If you are planning on selling it is still a great time to do so.