Should You Be Worried About Another Housing Bubble?

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Today, I’m here with the April edition of your real estate market update in the local area.  Recently, agents across the country were asked, “Are you optimistic about the 2016 housing market?” Fortunately, 73% are optimistic about what’s going to happen in real estate this year. Only 5% were not optimistic. 

According to the a home sales report by the National Association of Realtors, we started off the year extremely well. Existing home sales are up 11% year over year. In the Northeast, existing home sales are up 20.6% over the same time last year! That’s stellar news.

There is one issue the market faces right now, but it will begin to fix itself as we move through the year. Mark Zandi, the chief economist of Moody's, explained, “The most important housing market trend in 2016 will be the developing housing shortage. New housing has picked up in recent years but it remains well below that needed to meet demand.” 

Over the last seven months, inventory has fallen well below what it was last year. A balanced market has about six months of inventory. We haven’t had a balanced market in over a year. Right now, we’re struggling to maintain inventory levels of four months. That’s the issue our market combats.

The good news is that home prices are up; demand is strong and supply is low. Again, six months of inventory means we’re in a balanced market. Anything below six months is a seller’s market, which means home prices will rise. Right now, we are in a strong seller’s market. 

Some media outlets are starting to posit that another housing bubble is about to happen. I want to put that myth to rest. The challenge isn’t that prices are rising unnaturally; we just have a supply and demand situation. In 2006, we had artificial demand created by lax mortgage conditions. 

When mortgage credit availability was higher, the easier it was to get a mortgage. We are nowhere near where the index stood in 2004, 2005, or 2006. People who should have been getting mortgages were being approved left and right, which created the housing bubble. Today, we’re in a normal free market situation. Supply is not keeping up with demand. As a result, prices are going up. 

I want to finish this market report by inviting you to look at our exclusive Free Seasonal Reports. My team and I put these together four times a year capturing the most important information and trends in the market. Click here to access the latest news for this quarter and share them with anyone planning to make a move in 2016. And if you’re thinking of selling in 2016, be on the lookout for our next Home Selling Shark Seminar on June 21st. 

As always, if you have any questions, give us a call or send us an email. We would be happy to help you!