Last Updated on February 27, 2022 by Luke Feldbrugge
If you’re concerned that the current hot housing market is unsustainable you aren’t alone. A Redfin study found that 77% of homebuyers surveyed believe there is a housing price bubble. Meanwhile, 44% of real estate agents believe there’s a housing bubble in the market where they work.
A “housing bubble” is characterized by rapid, unsustainable growth in home prices, eventually “bursting” when demand no longer supports the high home values, followed by sharp price declines. It’s typically caused by an influx of demand from homebuyers and real estate investors.
Here’s the good news, economists don’t agree. Redfin’s chief economist says rising mortgage rates and buyers who can afford their homes are preventing a housing bubble.
According to the National Association of REALTORS®, Housing price growth was expected to be 16.9 percent in 2021, and it’s projected to slow to 7.0 percent in 2022. Growth was 11.3 percent in 2020. Zillow predicts home values to grow 13.6% over the twelve months ending October 2022. Fannie Mae and Freddie Mac expect the growth to be in the single digits at 8% and 7%, respectively. Goldman Sachs’ projection comes in much higher. The investment bank predicts that home prices will grow a further 16% by the end of 2022.
On the other side of this equation is the sustained desire to buy homes even in one of the most competitive housing markets ever. NAR projects home sales will reach 6.8 million in 2021, remaining flat in 2022. Sales were 6.5 million in 2020. Americans likely will purchase 920,000 newly built houses in 2022, a 15% jump from this year. While transactions of new homes jump, the sales of existing homes probably will dip to 5.9 million in 2022 from a 16-year high of 6.8 million in 2021.
A look back at the last housing bubble shows that the variables were completely different. To begin with, prices were high but so was inventory and crucially lending standards were completely different and much looser than what we see today. That dynamic created a perfect storm that led the housing market to a foreclosure crisis. More than 6 million homes were lost by people who couldn’t pay their mortgages, pouring more inventory into a market where joblessness also hammered demand.
We’re seeing nothing like that now. Foreclosures are at an all-time low and the delinquency rate is near its record low-water mark as well, according to Black Knight data. This is great news for the economy but not so good if you were waiting on the sidelines for prices to drop.
Still, even in this market finding an affordable home can be achieved. With proper research, planning and patience, any prospective home buyer can find a property priced just right for their budget. It might take a while, but with the right real estate professional, it’s possible.
Your local Homes for Heroes real estate specialist is just the talent you want in your corner to find that new home in this competitive market. In addition, on average, heroes can save $2,400 when they use a Homes for Heroes real estate and mortgage specialist to close on a new home. These savings are given directly back to you after closing, and can be used to cover anything from moving costs to buying new furniture, or something a little more fun like a vacation. Sign up today to get started with your local Homes for Heroes specialist and let them help you achieve your home buying goal.