Are we in a Housing Bubble?

Are We in a Housing Bubble? 10 Signs of a Bubble and What They Mean

  1. Rapidly Rising Prices – This is the main reason everyone is afraid we are in a bubble. Prices are climbing because demand is way up & supply is way down.
  2. “Have to get in” Mentality – People develop a fear of missing out & therefore buy when the market is up & sell when the market is down. It is the mindset of “If I don’t buy now, I’ll never be able to get in.”
  3. Investor Frenzy – Individual investors are buying up quite a bit, but we are not seeing big institutional investors join the game as much quite yet.
  4. Poor Affordability – Although home prices are up, rates are still low, so the house payments are affordable, even at higher price points.
  5. Fraud Scams – During the last housing crisis, there were a lot of “bad loans” being granted. Mortgage market fraud is very low right now, due to the corrections that were made after the last recession.
  6. Weak Underwriting – When it is easy to get a loan, we get more fraud & bad decisions being made. Right now, that is not happening. Underwriting guidelines became more stringent during Covid.
  7. Decreasing Equity via Cash Out – In previous bubbles, cash-out refinances were taking equity off the table. This is not the case today.
  8. Rising Inventory/Falling Sales – We have not seen much of an increase in inventory. Inventory is an issue.
  9. Increasing Days on Market – When homeowners who are in payment trouble see homes sitting on the market for 6 months, they get discouraged & think they will never be able to sell their home, & therefore walk away. If they see inventory moving quickly, they sell & therefore foreclosures are very unlikely.
  10. Interest Rates – Rates are still at historic lows.
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