4 Simple Graphs Showing Why This Is Not a Housing Bubble
Houses Are Not Unaffordable Like They Were During the Housing Boom
Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is still well below 6%. That means the average purchaser today pays less of their monthly income toward their mortgage payment than they did back then.
Mortgage Standards Were Much More Relaxed During the Boom
During the housing bubble, it was much easier to get a mortgage than it is today. Mortgage standards are nothing like they were the last time. Purchasers that acquired a mortgage over the last decade are much more qualified.
The Foreclosure Situation Is Nothing Like It Was During the Crash
In the run-up to the housing bubble, some homeowners were using their homes as personal ATM machines. When home values began to fall, some homeowners wound up in negative equity situations and decided to walk away from their homes. That led to a rash of distressed property listings which lowered the value of other homes in the area.
Homeowners, however, have learned their lessons. Now, over 40% of homes in the country having more than 50% equity. But owners have not been tapping into it like the last time. With the average home equity now standing at $300,000, what happened last time won’t happen today.
We Don’t Have a Surplus of Homes on the Market – We Have a Shortage
There were too many homes for sale from 2007 to 2010, and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing the acceleration in home values to continue.
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