Here’s why our housing market is not in another bubble about to burst.

Are we heading into another housing crash like in 2007? I’ve been meeting with a lot of buyers and sellers who have been asking me that question. It’s clearly on people’s minds. For the market to be in a bubble, investment needs to be driving demand way beyond where it should be.

So are we in a real estate bubble? I don’t believe we are. This market may feel similar to the one back in 2007 due to all the high prices, but there are a few major factors that make this situation different:

1. Real estate bubbles are very rare. The 2007 housing crisis happened due to a series of events and decisions that would not occur today. Lending standards have become much stricter in the years since.

“Today’s market is much more stable.”

2. Many people had almost no equity in their homes back in 2007. The riskiest mortgages at the time required nearly no proof that buyers could truly afford them. Once the market fell, all kinds of people found out that their loans were worth more than the houses themselves. Today homeowner equity is at an all-time high.

3. New home construction has lagged quite a bit. According to the National Association of Home Builders, the U.S. went from averaging between 9 and 11 million housing starts per decade from the 1960s to 2000, to just under 7 million homes during the 2010s. Also, as properties became more expensive to build, home builders were encouraged to build more luxury homes than starter homes. Due to all that, it’s likely to take years before supply and demand balance out again.

4.Buyers are paying with cash or are extremely qualified for their home loans. No one is buying breezily like right before the 2007 crash. The state of our market is much more stable than back then, so there’s no need to worry about another market bubble.

So when can we expect home prices to decline? My best guess is that they won’t drop for another five years. None of the factors that can change the market will happen overnight. If you’re waiting for prices to dip, you may be waiting a very long time. If you have questions about this topic or any others, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.