Are We In A Housing Bubble?

Another housing bubble?
Could we be on the brink of another housing bubble?

Home ownership continues to be The American Dream. In fact, prior to the 1950’s, less than half of Americans owned their own home. Fast forward to today and this rate currently sits at 65.5%. This continued growth in home ownership has allowed home prices to rise over time. Of course, there have been some setbacks such as the housing collapse that took place approximately 15 years ago. We discuss some key differences in today’s housing market as compared to the market of 15 years ago.

Characteristics of the last housing bubble

For those of us that are old enough to remember the housing collapse that took place approximately 15 years ago, there are few key items were unique to that market. They were as follows:

  • Loose lending standards: Liberal lending requirements resulted in many purchasers not being truly qualified for the mortgages they obtained. This led to an artificial environment of home affordability.
  • Cashing out: As prices rose dramatically, many homeowners refinanced their homes in order to pull out equity. This resulted in unsubstantiated wealth and led to many homeowners living well above their means.
  • Foreclosure wave: As prices began to drop considerably, many homeowners were well underwater with their mortgages. This resulted in many homeowners walking away from their homes and thus leading to a wave of foreclosures.

How is the current housing market different?

There are some significant differences between the current housing market and the one from 15 years ago. A few key differences are as follows:

  • Tighter lending standards: Leading up to the previous housing bubble, banks were creating artificial housing demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. In the current market, this is certainly not the case as lending standards have become particularly more stringent. To highlight this, the Urban Institute compiled a nice graphic depicting this and it can be found here.
  • Less cash-out refinancing: When home prices were rising rapidly during the early 2000’s, many homeowners felt as though it would never end. As a result, we saw many taking advantage of the increased equity in their homes by refinancing to pull cash out against their homes. These cash-out strategies were used to fund lavish purchases such as new cars, boats, and even vacations. Needless to say, as prices began to fall, these homeowners became well underwater on their mortgages. Looking at the current market, it is estimated that 41.9% of all mortgaged homes have at least 50% equity. In fact, homeowners in Q4 2021 had an average of $307,000 in equity. This figure is a historic high.


While nobody has a crystal ball as to where home prices will go from here, it is important to note some key differences in the current housing market as compared to the most recent housing bubble. With the Federal Reserve raising interest rates at a faster pace than originally planned, we are already beginning to see the impact in reduced buyer demand. Therefore, home price stabilization and even slight retraction is expected in some markets. As for the Florida market, we continue to see record-high demand from Americans relocating to The Sunshine State. In fact, it is estimated that Florida’s population may grow by 3.5 million residents to reach a total of 26 million by the year 2030. With this said, we expect our slice of paradise to fare better than the rest of the country, regardless of the market dynamics. Do you have questions about the South Florida real estate market? Contact Natasha today at Live South Florida Realty, Inc.!

At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.

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