Housing Bubble Fears?

As written in REALTOR Magazine on July 14, 2022 by Melissa Dittman Tracey, about 45% of home sellers said they believed the housing market was headed for a crash in 2022, per a study from Clever Real Estate. And, Google Trends data showed a spike in searches for “housing bubble”.

The current housing market is much different than we have experienced in recent history. The “housing crisis” of 2007 and 2008 was due to loose lending practices. We have progressed from there and adjusted lending regulations to be more stringent. That is not the only fear by todays sellers and buyers. There is concern about a slowing economy along with the recent increase in home prices.

What most people don’t realize is that in 2007-2008 there was a surplus of housing which is definitely not the case today. Nationwide we have a housing shortage and that goes for Omaha too. Shortly after the housing crisis, building of new homes almost came to a stand still and was slow to return for quite a few years. I remember looking at the many developments and thinking how weird it was to not see any building going on. Years later, it was exciting to see some raw lumber beginning to take shape along the horizon. It was a slow revival.

So, what about the increase in prices? The National Association of Realtors (NAR) notes that the median home price nationwide exceeded $400,000 for the first time in history. In Omaha, we surpassed $300,000 for the first time. Lawrence Yun, chief economist for the National Association of REALTORS® says, “A 5% price correction in, say, places like Phoenix could be possible—but that comes after about a 50% price gain in just the last two years. “Even if there were to be a localized price correction, it will not cause harm to the [overall] housing market or to the financial banking system. Some buyers will simply view it as a second-chance opportunity to get into the market after being outbid by others over the past two years, and the balance sheets of the banking industry are quite strong. So maybe prices would adjust downward—or maybe not. Let it be because it doesn’t really matter this time.”

What to consider:

• Mortgages are structured differently now- Subprime lending is more regulated today

• Housing inventory reamins low- We are roughly 3 million homes short of meeting demand nationally, per Freddie Mac estiamtes and this will remain to be an issue for some years to come, Yun says.

• Buyer demand is still high- Buyers who were outbid the last 2 years have a second chance at homeownership and rental opportunties remain low, not to overlook, people want to achieve the American Dream.

• A market correction is not the same as a crash- We have seen signs of a slowing market or market correction, as prices decline a bit and homes remain on the market a week or two rather than selling in a day, if not hours.