Economists told Inman that today’s rising home prices and a persistent seller’s market differ from the 2007 housing bubble in a few key ways.
Historically low inventory leading buyers to make rushed decisions. Bidding wars helping push up record high housing prices. Many in the nation’s largest homebuying generation are being priced out of markets nationwide. Are these the signs of a housing bubble?
It’s hard not to look at the unprecedented territory of the U.S. post-COVID housing market with a twinge of fear that the country is returning to conditions that existed before the collapse around the Great Recession.
As common as the question is these days, economists say today’s market boils down to the simple economic principles of supply and demand.
“I was thinking, ‘What is really a bubble?’” said Selma Hepp, chief economist of CoreLogic. “There is no firm definition of a bubble.”
“To some people, high appreciation is going to be a bubble. To others it’s high speculation,” Hepp said. “Generally among economists we think when there is an increase in speculation, when people are buying based on expectation of appreciation as opposed to that need for housing, that’s when we could be in a bubble.”
Yet there are many more signs that point to a healthy market that was sped up due to unique conditions brought on by the coronavirus pandemic.
In a way, the pandemic may have led buyers who ordinarily might have purchased a first or second home in a few years to do so much sooner.
“One question we don’t know for sure is how many people moved forward to buy a house because of the stimulus and low interest rates that they would have bought this year or next year,” said Doug Duncan, chief economist at Fannie Mae.
That expedited purchasing might not make it any easier for those who are getting squeezed out of entering the market for the first time.
Josh Alberto | Porchlight San Diego
“Everybody is going to have their own mindset…