Interested in exclusive real estate news and commentary? Join HW’s free twice-weekly newsletter OpenHouse to stay informed. That said, I’ll enjoy this bubble-less time while it lasts. It was the impetus for the subprime mortgage crisis. If I were granted a wish, it would be that we stay at these levels of slow and steady growth for years to come – but the economics don’t abide by hopes, and dreams rarely come true in economic land. The 2000s United States housing bubble was a real-estate bubble affecting over half of the U.S. This is very different compared to the housing bubble years. And slow and steady growth is bullish, not only for housing but for the economy. Growth in all these areas has been slow and steady. In my opinion, nominal home price growth above 4.6% will not be bullish for the housing market, long term.įor now, however, we don’t have an overheating market in existing home sales, real home price gains, new home sales, housing starts or purchase applications. Increasing housing tenure, a substantial young demographic patch and low mortgage rates are creating a backdrop for growth in real home prices to be positive again in 2020. And as long as they stay this low, real home prices can be positive in 2020, but not overheat like what we saw from 2002-20. They are qualified and comfortable homeowners with nested equity – especially those who bought homes from 2010-2016. Most crucial, homeowners today, in general, have excellent cash flow. We do not see a boom in cash-out refinancing or exotic, high-risk loans. Since the median age of the first time home buyer is 33, we can expect stable replacement in buyer demand once these folks become ready to buy.įor those who do need to move up to bigger homes, the loan quality in this cycle is excellent. population is entering into a large demographic patch of ages 26-32. An additional factor likely to affect home prices is that the U.S. The increase in housing tenure means inventory will be low, which helps to boost nominal home prices. So what does this all have to do with a housing bubble? Homeowners, who in the past would move into larger homes after five to seven years, are staying in their homes much longer. This happened as housing demand picked up. The longer we stay at these levels, the better it is for everyone.Įven though existing home sales for 2019 were flat, the monthly supply of homes, which had been increasing early in 2019 compared to the previous year, dropped noticeably later in the year. Meanwhile, the 10-city composite is still down -1.2% and the 20 city composite is down 0.7%. With the latest Case Shiller home price data – which lags a bit still – real home price gains nationally are only up 0.3% year over year. Nothing about this cycle warrants the discussion of record-breaking demand or bubble talk. Unlike the bubble years, purchase application data, existing home sales, new home sales, housing starts and the lack of cash-out refinancing all point to slow and steady growth. Look at the difference in the metrics for the real bubble years of 2002-2005 compared to the current cycle years 2012-2020. Despite what some want you to believe, this housing cycle is not in a bubble.
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