3 Reasons Were Not In A Housing Bubble

Dated: 01/10/2018

Views: 162

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

2058 SE 112th Ave Portland OR 97216

New Listing!  -  2058 SE 112th Ave. Portland, OR 97216This fantastic home is ready for it's new owner! Featuring a living room with a wood burning fireplace, three bedrooms, plus a

Read More

Upcoming Listing In Lake Oswego

1804 Oak Knoll Ct., Lake Oswego, OR 97034Coming Soon!Beautiful, Open 3 Bedroom / 3 Bathroom, 2,672sf Home in Desirable Lake Oswego!

Read More

35701 NE Chamberlain RD Corbett OR 97019

GORGE-ous Views!47+ Acres overlooking the Beautiful Columbia Gorge!Amazing 5,000+sf Home, Guest House, Dog Barn, Dog Kennels, Horse Barn, Equipment Garage, and Much More!Virtual TourYouTube

Read More

Upcoming Listing 15028 NW Todd St Beaverton OR 97006

COMING SOON!  -  New Listing in Beaverton!15028 NW Todd St Beaverton OR 970063 Bedrooms, 2.5 Bathrooms,

Read More