The Market Is Hot, But It’s Not a Bubble Because the market is hot – with houses selling in record time, prices increasing and bidding wars becoming commonplace – there&rsquo
Mid Year Update
Dated: July 5 2021
The Market Is Hot, But It’s Not a Bubble
Because the market is hot – with houses selling in record time, prices increasing and bidding wars becoming commonplace – there’s anxiety about a possible property bubble and crash. However, there are many differences between the real estate market today and the market in 2007 – 2008, when the last bubble happened. Back then, the crash was caused by low down payments, flexible rate mortgages and an oversupply of property. The 2021 real estate market is very different: During the pandemic, homeowners have been making substantially higher down payments. Meanwhile, conventional mortgages have increased, from 49.7% pre-pandemic to 53% today. Finally, with tighter lending restrictions and stricter mortgage qualifications, people are staying within their means, decreasing the risk of a foreclosure crisis.
Dr. Yun shared that we are past the absolute acute shortage of inventory in the marketplace. However, housing stock is still low, with demand outstripping supply. In July 2007, for example, there were 4 million homes for sale. In early 2021, there were 1.03 million. New construction is beginning to play catch up, although housing is taking longer to complete because of higher material costs, including lumber. Interestingly, more inventory may come online as older sellers who were reluctant to show their homes during the pandemic gain the confidence to put their properties on the market now that COVID-19 cases are dropping and vaccinations have gained pace.
Because inventory is low and buyer demand has increased, home prices are still high. Houses are selling fast and buyers trying to enter the market face stiff competition and increased costs. Dr. Yun believes there will be no persistent decline in prices anytime soon because of the strength of the appreciation and the army of homebuyers who have been outbid and who want a second chance opportunity to purchase.
Michelle Selvey is a third generation agent. Real Estate is definitely in her genes! She has called Lake Norman home since 1989 and has raised her family here, giving her first hand knowledge of the....