CNBC recently published a story about Google searches centering around a potential housing market crash. With so many articles about a potential housing bubble formation, it is easy to see why people are worried.
Yes, it may seem like we are experiencing 2006 all over again, though we’re here to tell you, it isn’t the same. As of now, all signs point to a continuously healthy housing market. Bubbles often form because banks release risky financial products or there are large supplies of homes more than a demand.
Neither of these things is happening at the moment.
Supply and Demand imbalance
According to FreddieMac, the housing shortage skyrocketed to 3.8 million near the end of 2020. Compared to 2018, that was a 52% increase, meaning more than 15 million millennials will continue aging into their prime home-buying age of 32 over the course of the next few years.
The worst part of this is that many new homes under construction that are less than 1,400 square feet, sometimes referred to as entry-level homes, sunk during the Great Depression and has yet to make a comeback.
People continued to put stimulus money into their saving’s accounts and COVID-19 forced them to save money instead of taking vacations or going out. In April of 2020, the the personal savings rate skyrocketed to 32.3%.
Many renters began entering the buying pool with all of this money saved up, allowing them to buy homes sooner than they may have initially expected. Many buyers said that making the down payment was the most difficult part of buying a home. However, the hardest things for many potential home buyers now include competition and down payments.
The Market Isn’t Overheating, Though It Is Hot
The pandemic impacted the world in many ways, though the effect it had on the home-buying market is unparalleled.
Prospective homebuyers that ended up keeping their jobs during the pandemic stopped spending money on going out or traveling. When interest rates dropped, people who were planning to buy later down the line began buying right now.
If we have any tips for you, it would be to get in on the market right now. New construction has about a 3 or 4-year lag at this moment, meaning the scarcity of housing inventory won’t change any time soon.
Plus, if you buy now, you can lock in insanely low mortgage rates.
While Bubbles Happen Eventually, We Are Not In One
The housing market can’t avoid bubbles. People often follow the market and what other people are doing, as this is the path of least resistance. Behavioral economists have been studying this phenomenon for many years. From the dot-com buyers in the 1990s to the cryptocurrency buyers in the 2010s, bubbles form with every generation.
Nowadays, the college-crazed generation is getting to the point of homeownership. While they can afford to pay for homes, there aren’t many available, which is likely why we won’t see another bubble for a long time.
If you’re ready to sell your old home and take your chances with the hot market that we’re in right now, make sure to get in touch with us here at EZ Max Offer. We’ve helped thousands of off-market sellers get the money they are looking for fast. We look forward to hearing from you.