Zillow, an online real estate marketplace, has surveyed housing economists and concluded that the current frothy housing market is not in a bubble.
The latest Zillow Home Price Expectations Survey polled more than 100 experts from academia, government, and the private sector to seek a consensus opinion on the state of housing and the outlook during this uncertain economic time. Of those surveyed, 60% said they do not believe the U.S. housing market is currently in a bubble, compared to 32% who think we are in a bubble and 8% who are not sure.
A bubble exists in an environment where home prices have exceeded fundamental values and consumers’ ability to continue purchases. Buyers suddenly disappear from the scene and values come back to earth.
Still plenty of qualified buyers
Even though the Mortgage Bankers Association reports that mortgage applications plunged 6.5% last week, real estate sales veteran Josh Altman, co-founder & advisor at BidMyListing.com, says rapidly rising home prices aren’t keeping buyers out of the market.
“June and July are some of the most popular months to purchase a home,” Altman told ConsumerAffairs. “The summer season is one where there is a competitive inventory; houses do not stay on the market long. The average number of days a house was listed on the market was only 31 days in the month of May.”
While the lack of housing inventory is contributing to higher prices and is making homes less affordable, Altman says the competition for available homes will keep prices on the higher side, at least for now. That may put pressure on first-time buyers, who tend to be young, but Altman says there are plenty of buyers who can afford the limited number of homes that are on the market.
“One of the primary reasons people want to buy a house is appreciation and ownership,” Altman said. “As a result, home prices will continue to increase until there is a significant change in interest rates and inventory along with other factors like supply chain limitations and the low market inventory.”
Last housing bubble
The last time there was a housing bubble was the early 2000s, when lax underwriting standards and cheap money led to a boom in homebuilding with ever-increasing prices. It all came crashing down in a wave of foreclosures in 2009.
"Although a recession is looking more and more likely, the housing market today is a far different beast than what we saw in the mid-2000s," said Zillow economist Nicole Bachaud. "Unlike in 2006, this market is underpinned by strong fundamentals and has been built on mortgages with sound credit, factors that won't change in the near term."
Altman advises would-be buyers to research the location where they want to buy a home. A comparison of the local real estate market to the national market can show if the local market is in line with the national real estate trends. A disconnect could offer negotiation opportunities, he says.