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Yes, Home Prices Are Going Up. No, a New Housing Bubble is Not Forming

We recently reported that home prices are continuing to rise across most of the nation. This has created concern in some pundits that a housing bubble, as we saw ten years ago, is forming again. We want to explain why these concerns are unfounded.
 
The current increase in home values can be easily explained by the theory of supply and demand. Right now, the number of families looking to purchase a home is greater than the supply of homes on the market.
 
Here is a chart that explains how the months’ supply of housing inventory impacts home values:
 
 
According to the latest Existing Home Sales Report from the National Association of Realtors, there is currently a four-month supply of inventory. That puts us in the blue section of the above graphic. Home prices should be appreciating.
 
The difference in 2006.
 
A decade ago, the demand for housing was artificially boosted by lending standards that were far too lenient. Today, the strength of the demand for housing is legitimate, as lending standards are nowhere near what they were a decade ago.
 
For proof of this, let’s look at a graph of the Mortgage Bankers’ Association’s Mortgage Credit Availability Index:
 
 
The higher the number, the easier it was to get a mortgage. We can see that from June 2005 to June 2007, mortgage standards were much more lenient than they have been over the last nine years.
 

Bottom Line

Today’s price increases, unlike those a decade ago, are the result of qualified buyer demand exceeding the current inventory of homes available for sale. Once the supply increases, prices will level out.

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Malloy Home Team at SERHANT.

In a market where presentation, strategy, and relationships define outcomes, choosing the right team isn’t optional, it’s everything. At the Malloy Home Team at SERHANT., we don’t just list homes. We position them. We don’t just find properties. We secure opportunities others never see.

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By providing your contact information to Malloy Home Team, your personal information will be processed in accordance with Malloy Home Team's Privacy Policy. By checking the box(es) below, you expressly consent to receive marketing or promotional real estate communication from Malloy Home Team in the manner selected by you. For SMS text messages, message frequency varies. Message and data rates may apply. Consent is not a condition of purchase of any goods or services. You may opt out of receiving further communications from Malloy Home Team at any time. To opt out of receiving SMS text messages, reply STOP to unsubscribe. SMS text messaging is subject to our Terms of Use.
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MALLOY HOME TEAM

 

DANIEL MALLOY

(561) 370-5736
[email protected]


DAWN MALLOY

(561) 876-8135
[email protected]

114 N Coastal Way Jupiter, FL 33477