I’m a fairly smart guy, at least that’s what I tell my family and friends all the time. However, when it comes to learning about the current state of the market, I seek out expert economist’s advice such as Lawrence Yun. Mr. Yun is the Chief Economist for the National Association of Realtors. Mr. Yun studies and then shares his opinion of the national real estate market and is well respected within the industry. This post is designed to summarize his answer to the question about whether we are in a bubble or not. So here is my summary of what a REALLY smart guy has to say:
The underlying conditions of today’s market are much different than what they were in the bubble of a decade ago. That bubble was created by easy to obtain credit, yearly home sales were healthy at 8.5 million and new construction volume was approximately 2 million annually.
On the contrary, in today’s market, credit is extremely tight. You have to be doing more than just breathing to get a loan these days! In addition, sales currently are just above 5 million and new construction is only at 1 million units.
After working through various scenarios, Mr. Yun expects home prices to continue to rise as long as mortgage rates remain under 6 percent. We are currently bouncing around the 4 percent mark and he believes it may rise to 5.5 percent by the end on 2016. If rates cross above 6 percent down the road, then home prices should level off. In the meantime, healthy job creation and increases in income levels will help to boost home prices. Cool…no giant bubble crashing into our housing market any time soon!
Here is a link to the full article by Lawrence Yun: No Housing Bubble in Sight . As always, I hope this helps!
All my best,