Are We Headed for Another Bubble?
I feel like I get the question, “Are we in another housing bubble?” every day. Here’s what we know right now.
Home prices have increased nationally for the 50th straight month. For over four years, prices have been going up each month. This has led to a lot of speculation about whether we are in another bubble and when that bubble is going to pop.
First off, the situation is a lot different now than it was in 2006. Back then, the bubble was led by loose borrowing and junk mortgages. If you’ve seen "The Big Short" you know what I’m talking about. Mortgages today aren’t so easy to come by. Lending guidelines are much stricter thanks to the Dodd-Frank Act. Things are cleaned up, and that’s a key difference.
The other thing we are seeing differently is the number of new home builds. New home starts are at historic lows right now nationally. In 2006, we saw the highest ever number of new home builds. Back then, builders were building speculatively, and things didn’t quite pan out.
Now, builders are just as busy as they were back then, but it’s because of increased demand for new homes by buyers who are already in the market. In Charleston, the builders can’t even keep up with the demand. Our inventory keeps dropping as builders keep building.
Because of those two reasons, we really are not looking at another bubble. Prices are going up because demand is high and supply is low. What will happen to our economy if we have another dip? It will certainly affect home prices, but we simply don’t know when that is going to happen. What we do know is that right now is a great time to buy because money is cheap. It’s also a great time to sell because of the aforementioned demand for homes.
If you have any questions for me or if you’re looking to buy or sell, give me a call or send me an email. I look forward to hearing from you soon!