3 Reasons Were Not In A Housing Bubble

Dated: 01/10/2018

Views: 316

3 Reasons We’re Not in a Housing Bubble

Home prices are rising three to four times faster 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 start uttering the words “housing bubble,” but Yun discounts those warnings.


“Even though the credit conditions appear 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 imply 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 during the housing bubble. Today, scores are at about 740 to 750 compared to 710 to 720 during the housing crisis, according to Fannie Mae data. Also, the no-doc requirements for subprime mortgages of yesteryear are nearly gone today.

Yun also notes that while 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 was reaching 25 percent of income.”

Finally, Yun says you can squash those bubble fears by just looking at the housing supply. Inventories are at about four to five months today, which is similar 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 back then. 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 latest home-price increases, he says.

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

Source: “Are we Entering a New Housing Bubble?” Forbes.com

Blog author image

Molly LeBlanc

I am a Real Estate Broker in both Oregon and Washington, I started in 2008. I have been through quite a variety of markets here, and it has taught me more than I ever imagined! I love how each day is ....

Want to Advertise on this Site?

Latest Blog Posts

City Of Portland Home Energy Scores

City of Portland Home Energy ScoresPeople Don’t Buy Homes for 10sThe City of Portland’s law requiring homeowners to attain an energy score before listing their home for sale went into

Read More

Homebuying Basics What Are Appraisal Contingencies

Homebuying basics: What are appraisal contingencies? © fstop123/Getty Images The appraisal was key contingent to most home buysFirst the good news: You've made an offer on a home and the

Read More

Is Buying A Multifamily Home A Worthwhile Investment The Real Pros And Cons

Is Buying a Multifamily Home a Worthwhile Investment? The Real Pros and ConsBy Julie Ryan Evans | Mar 5, 2018 littleny/iStockBuying a multifamily home can put you on the

Read More

A Revolving Door Inside A House

Revolving Door, Glass Walls and Diverse Textures: Revamped Condo in Tokyoby Sherry NothingamEver thought about replacing the traditional or French doors in your home with a revolving door? The

Read More