Whether or not we’re facing a market bubble that’s on the verge of popping has been a hot topic in real estate for the past year. Many professionals hold the very valid opinion that we are, and have given their reasons as to why. Check out this article from Forbes that provides a compelling argument. Also an important factor to consider is the shortage of building materials, land, and skilled labor as discussed in this CNBC article.

But, what do the stats say?

A weekly update from the National Association of Realtors provides some recent stats on supply and pricing. Check out these summaries (and click through the link to review the numbers and charts):

  • Active listings in May slightly rose from those in April but remain at a year-over-year low
  • Demand continues to outpace supply
  • Prices in May remain at a year-over-year high but have decreased since April 2021
  • The time that properties are listed online (on realtor.com) continues to drop and, as of May, sell 32x faster than this time last year
  • 30-year mortgage rates remain below 3 percent
  • The number of loans in forbearance continues to decline

The biggest cause for concern remains sky-high property prices paired with low inventory. So, if there is so much solid evidence for a market bubble, then why would anyone say otherwise?

A lot of people are pairing current conditions with what we saw in 2006

Often when we discuss whether or not we’re in a real estate bubble, we reference the market bubble of 2006, or just have it in our minds as a comparison. While there are many similarities, people forget that, financially, things are very different now.

This Bloomberg article discusses why we may not actually be in a market bubble. Here’s why:

Loans are much harder to get – Before the last market crash in 2008, loans were very easy to secure. Many borrowers didn’t even need to provide documentation, or needed to provide very little, to prove that they had the income and assets to comfortably be able to afford a mortgage.

Approved loans were larger than they should have been – Now, lenders are approving borrowers for much smaller loans for their income bracket than previously. Right now, this is huge. With prices sky-rocketing and approved loan values smaller than previously, many people have been priced out of this sellers’ market. While they can still look at homes further out than they may consider ideal, and in less expensive neighborhoods, they also need to be willing to compromise on location.

In addition, average credit scores are much higher now than before the 2008 crisis, mortgage loans have adjustable rates, and there are far less homeowners with negative equity (2.8%, down from 26% in 2009). In fact, Bloomberg remarks that “the biggest threat to the housing market is a sharp increase in the current ultralow mortgage rates, which have moderated the impact of rising home prices.”

What do you think?

You’ll want to be tracking more than just mortgage rates during these unprecedented times. Gain access to Deed and Mortgage Data, Mortgage Assignment Data, Loan Originator Data, and more market intelligence with The Warren Group. We collect property and financial data all over the country so real estate professionals can track changes in their market. Check out what our data can do for you and when you’re ready, contact a data specialist today.