We’re Not in a Housing Bubble 3 Reasons Why

Home prices are rising 3 to 4 times quicker than wages while credit conditions are loosening, Lawrence Yun, chief economist for the National Association of REALTORS®, notes in his latest column at Forbes.com. These kinds of conditions usually prompt housing analysts to begin uttering the words housing bubble, but Yun discounts those warnings. “Even although the credit conditions seem to be easing somewhat, the move is from overly stringent conditions to not-so-overly-stringent conditions,” Yun writes. “It is a far-fetched view to suggest the current mortgage approval process in any way resembles the loosey-goosey, easy subprime mortgage access conditions of a decade ago.”

Indeed, mortgage credit scores are nowhere near where they were while in the housing bubble. Today, scores are at about 740 to 750 compared to 710 to 720 throughout the housing crisis, based on Fannie Mae data. Also, the no-doc requirements for subprime mortgages of yesteryear are nearly gone today. Yun also notes that even though home prices are rising above wages, low mortgage rates have been a silver lining.”For someone making a 20 percent down payment, the monthly mortgage payment at today’s mortgage rates would take up 15 percent of a person’s gross income,” Yun writes. “During the bubble years, it had been reaching 25 % of income.”

Finally, Yun says you can squash those bubble fears by just looking at the housing supply. Inventories are at around four to five months today, which has similarities to the bubble years. However, sales aren’t moving at the same pace. Existing-home sales and new-home sales combined were at 8.4 million in the past. In 2015, combined home sales were 5.76 million – about one-third lower, Yun notes. The limited supply of homes for sale is what mostly is behind the most recent home-price increases, he says.

“We are not in a housing bubble in terms of an inevitable impending home-price crash,” Yun says. “Rather, we’re facing an above-normal home-price growth trend, which admittedly is unhealthy on several levels due to the simple economic law of insufficient supply. We need more home building.”

So if you have been thinking about buying your new home, but have been deterred by all the negative in the media, as you can see it is not anywhere near where we were in 2005. Nick & Cindy Davis can assist you in purchasing your new home in the Tampa Bay and Surrounding areas. We are always just a click here or call to 813-300-7116 away.