There are four reasons why we’re not in a housing bubble.

If you’re worried we’re in another housing bubble, don’t be. There are four reasons this market is different from the one that preceded the last housing market crash:

1. Supply and demand. Our inventory of homes for sale is down 50% compared to this time last year, which was down 50% compared to the year before. At the same time, so many buyers are trying to take advantage of low interest rates. The reality is that there’s nothing out there to indicate that appreciation will slow down or that the supply and demand situation will change. We think the market will go up 10% this year and possibly another 10% next year. Unless the supply and demand ratio changes, our market won’t change either.

2. Homeowners are equity rich. In the last five years, the national market has appreciated 35%. That’s just the national average—if you bought a house in an area with higher demand in 2016 or 2017, it might have appreciated by as much as 50% by now. The fact that homeowners have that type of padding shows that people won’t be losing their homes anytime soon. If the market were to take a step back and drop, say, 5% (which is a ton, by the way), people would just assume the market is over the hill and start selling their homes. It would take a truly catastrophic crash for homeowners with at least 35% equity to feel any pain.

“Unless the supply and demand ratio changes, our market won’t change either.”

3. There aren’t as many homeowners in forbearance as the media portrays. According to the statistics, only 15% of FHA mortgages (which are government-backed mortgages) are in deferment. If we’re talking about all mortgage types, the percentage of deferments shrinks to 5%. People are catching up to their mortgage payments, and the government is helping them. During the middle of the pandemic, unemployment was as high as 20% and roughly 25% of all homeowners were deferring mortgage payments, but things have changed significantly since then. The bottom line is, I don’t think we’ll see a huge rush of foreclosures, and I think it could be at least a couple of years before we see any at all.

4. Affordability. Mortgage rates are hovering between 3% and 3.25%, which is incredible. This means that despite the rise in home prices, affordability is still right in line with people’s incomes and salaries. In fact, it’s way more affordable than renting. A lot of new buyers in the marketplace, especially millennials, are discovering that finding a home and sinking their equity into it is a very smart choice, especially if you carry a 20- or 30-year mortgage.

My team and I monitor the market very closely, so if things start to change, we’ll let you know right away. Otherwise, you can rest easy. If you’d like to know more about our market or would like my team’s help in buying or selling a home, don’t hesitate to reach out to me. I’d love to hear from you.