04/08/2022
Google searches for "Housing Bubble" have gone way up. Homeowners and potential buyers all want to know - what is going to happen to home values? It's important to stress that 2022 is not another 2008. The 2008 housing bubble burst in large part because sub-prime lending practices (starting in earnest in 1999) allowed borrowers to get into mortgages they could not truthfully afford. So when their 5-year ARM reset, or their interest-only loan term ended, they were stuck in mortgages they could not afford. As a result, the market was flooded with homes as borrowers defaulted or offloaded their mortgage debt, causing values to plummet.
Today, in contrast, we are in completely different market conditions. For one, sub-prime lending is essentially a thing of the past. Lending practices and qualification guildelines are highly regulated and standarized. For another, the demand driving this market is mostly due to demographics--approximately 30 years ago, a lot of babies were born! Many new families are forming and they are looking for homes. Housing is another area where supply simply can't meet demand.
Add demographics to historically low interest rates--driving demand even more--and that was the recipe for the record-setting housing appreciation we've seen in the last 2 years.
So now what? As we know, inflation is causing interest rates to rise which in turn is cooling off the red hot market of last summer. BUT--reader take note--this doesn't mean a housing bubble. The demand is still there and will continue to be there. It just means that appreciation will slow down to a healthier pace. Ultimately, this is good for everyone.
Bottom line - don't be afraid to jump in the market. If you are waiting for the bubble to burst...you will be waiting a very long time. Analysts predict appreciation at 8-10% this year. Even at 5%, that's a great return on your money.
I'd love to help you explore your options!
