Did you know? The median selling price for a home is up $35,000 compared to a year ago, which is the fastest-paced increase since 2006. Needless to say, one of the most common questions these days is: “Are we in a real estate bubble?”
Double digit gains in housing prices, bidding wars, an increase in sight unseen home purchases, and surging buyer demand are all reasons for the heightened concerns about a housing bubble. With this said, most economists feel quite confident that we are certainly NOT in a housing bubble.
This is not 2006
For those of you that may remember the housing market in 2006, the current market is much different. For starters, the current market is simply reflecting too much home buyer demand and not enough supply. Looking at the housing market in 2006, while there was strong buyer demand, there was not such a tight inventory. The current housing market has a record low number of homes available for sale. Of course, a big reason for this has been the pandemic. Many would-be home sellers have opted to not list their homes for sale for fear of increased exposure to COVID-19. According to data from the National Association of Realtors (NAR), as of March 2021 there were 1.07 million homes available for sale across the country. In July of 2007 there were approximately 4 million homes for sale throughout the country. Needless to say, this is about 4 times as much inventory as we see in today’s market.
Another stark contrast between the current real estate market and the market in 2006 is the lending environment. During the time period between 2004 to 2006, approximately 40% of loans were considered higher risk due to lower introductory rates, teaser rates, or balloon payment structures. Fast forward to the current market and only about 2% of loans are considered high-risk.
In analyzing the fundamentals of the current real estate market, it appears highly unlikely that we are in a housing bubble. With this said, price appreciation can not continue at it’s current pace. Therefore, we expect home prices to continue to rise but at a more gradual pace.
As always, the real estate market is highly dependent on local dynamics. In South Florida, we expect to see similar trends as we will across the nation. Of course, the biggest difference for the South Florida market is the sheer number of Americans relocating to The Sunshine State. In addition to the home purchase market, the rental home market is also seeing considerable demand and price appreciation.
Do you have questions about the South Florida real estate market? We can help. Contact Live South Florida Realty, Inc. today!