Are We in A Housing Bubble?

Over the last year, home prices have soared around the country. Now, the conversation on everyone’s mind is whether we’re experiencing a housing bubble. This is especially true for buyers who don’t want to buy right before the bubble burst. Plus, homeowners on the verge of selling don’t want to miss out on the epic price increases.

What Is A Housing Bubble?

A housing bubble occurs when housing prices rise quickly due to increased demand or decreased supply. In our current market, we’re experiencing both low supply and high demand which has driven up housing prices.

If the prices rise to a rate that is out of line with housing fundamentals, prices can fall sharply as the market regulates and demand settles. Typically, housing bubbles benefit sellers when the prices are high. Homebuyers may end up with a property and mortgage that has less value than what they paid or owe.

What Caused the Rise in Home Prices?

Before the pandemic hit, home prices across much of the country were already on the rise. Demand for affordable housing was spurred by the younger populations entering the job market and looking to purchase a home. Plus, lower interest rates made purchasing a home attainable for more people. At the same time, some in the older populations were staying in place instead of downsizing or shifting to senior living.

Then, when COVID-19 hit, the government implemented policies to protect homeowners from foreclosure and kept interest rates low. At the same time, labor shortages impacted new construction as well as the supply of building materials. Builders simply couldn’t get what they needed to finish homes and get them onto the market. 

Is the Bubble About to Burst?

This is a question for economists to debate. However, no one can provide a definitive answer. The market forces will influence what happens over the next few months and into 2022. 

A few factors that can contribute include:

• Interest rates

• Market demand

• Inventory rates

• Government stimulus programs

• Homeowner equity

• COVID outbreaks and restrictions

Right now, many experts believe the market may experience a dip in price increases but not a crash. There’s not a lot of data to support that housing inventories will increase enough to meet the level of demand. Therefore, prices should not fall. Yet, housing prices may stabilize making the major price hikes less drastic going forward. 

Should You Buy A House Now?

Purchasing a home is an important and personal decision. You should weigh your options carefully before you buy a home. With high demand and low supply, many homebuyers are paying more for houses while they are settling for a home that doesn’t meet their desires. 

Consider whether you really want and need the home you plan to buy. Then, don’t feel pressured to go above your budget to outbid others. Only you can decide if now is the right time to buy. 

Don’t Buy Without An Inspection

In the frenzy to win the bidding wars, many homeowners are waiving their rights to an inspection. This is a risk. Don’t get stuck paying for major repairs. Schedule a home inspection to understand the condition of the home.

Contact Kenco Home Inspections today with questions or to schedule a home inspection in Southeast Florida.