Why We Should Not Fear Another Housing Market Bubble
Many eyes turn to the markets when disaster strikes, and the coronavirus has been nothing short of a disaster. Even though there was a major initial market shut down, things are beginning to look normal again, it’s no surprise though that some are continuing to hold their breath, waiting for the other shoe to drop. So are experts predicting the bubble to pop as a result of the pandemic? The short answer is, NO, the US housing market is not forecast to crash. Here’s why we don’t have to worry about the housing market bubble popping anytime soon:
Not Our Problem
The current dilemma in the US is in no way related to the housing market, in fact the stay-at-home orders have actually increased the number of buyers on the market in search of bigger and better homes to quarantine in! Currently, there is a massive shortage of homes for sale on the market, there are thousands of buyers demanding and very few sellers supplying. In fact, inventory is down over 33% when compared to this time last year. This was the exact opposite during the 2008 housing market crash, too much supply and not enough demand.Property Prices On the Up-and-Up
In the infamous crash of 2008, properties for sale were so common that their prices fell through the floor. As aforementioned, the coronavirus pandemic and increase of buyers has shot prices of properties for sale through the roof! This seller’s market is another good sign that we are not headed for a burst in any bubble. With the housing market continuing to be more active than usual, home prices are not expected to drop much in the foreseeable future. Additionally, mortgage rates have been reduced to a record low rate. Rates are expected to remain near 3% for the next 18-months, allowing buyers to purchase homes they may have only dreamed of a few years ago. Real estate trends have continued to show a stable resilience, suring up that the predictions for the 2021 housing market remain optimistic.Good Guy Freddie Mac
When Covid-19 first began to make real waves in the US in March, the Federal Housing Administration (FHA) placed a major restriction on foreclosures to prevent home prices from completely nose diving as they did in 2008. This was a true blessing to homeowners whose household income was affected due to state-wide layoffs. The reopening of the economy, coupled with the various mortgage and other assistance programs, allowed October to track a nearly 90% reduction in foreclosures with active foreclosure inventory setting another record low! The low interest rates have allowed many homeowners to increase their prepayment rate to record high levels as well.
So, with stable market trends, a need for inventory and slashed mortgage and loan rates, it looks like the housing market will continue to favor the seller with no bubble popping in sight.
