Estimated read time: 4-5 minutes
Americans are well aware of the real estate bubble of the 2000s that ultimately led to the economic crisis of 2007. With the current changes in the housing market, many fear that the same thing will happen again. But given the difference between what happened 15 years ago and what’s happening today, the housing bubble doesn’t seem to be predicted.
First, the definition can be useful.according to Bank rate, The real estate bubble, also known as the “housing bubble,” occurs when home prices rise sharply due to increased demand, supply restrictions, and emotional purchases. When speculators recognize that house prices are rising, when they rise, they enter the market and further boost demand. This phenomenon is called a bubble because it bursts at some point. “
It may sound similar to what’s happening in the current market, but there are some important differences that reassure Utah buyers and sellers.
Utah is still facing a housing shortage. To determine if it is the seller’s market or the buyer’s market, the realtor looks at the number of months of supply inventory (MSI). It measures the number of months it takes for the current market to sell out of stock. Norada Real Estate A balanced market is said to be between 4 and 6 months. Less is the seller’s market and more is the buyer’s market. Current MLS inventory has more than doubled since January, but MSI is still less than two months old. This means that there is a long way to go before the state enters the buyer’s market.
Rising interest rates
Housing bubbles are usually associated with low interest rates, but today they are on the rise. To slow down the market, the Federal Reserve recently raised interest rates by half a percentage point. This is the biggest rate hike in 20 years. Bank rate.. The market has been so hot over the last two years that interest rates had to be raised to more normal levels for the market to begin adjusting.
Historically low unemployment rate
Economically, Utah is still prosperous.up to date Labor service sector According to the data, Utah’s unemployment rate remains historically low. The national unemployment rate in March 2022 was 3.6% and only 2.0% in Utah.
Once a well-maintained secret in the Mountain West, people from all over the country are now beginning to flock to Beehive, thanks to the booming economy, low crime rates, beautiful scenery and other selling points. The American Enterprise Institute Utah was one of the top 10 inbound states in 2021, and reported that its popularity all corresponded to the fast-growing real estate market.
The major differences between 15 years ago and now are: At that time, getting a mortgage was pretty easy. People were receiving much higher mortgages than they could pay, which eventually led to the bursting of the real estate bubble. today? Not so many.
Loan requirements have become more stringent, especially in the last few years, and borrowers must meet certain credit and income requirements to qualify for the required loans. This reduces the risk that people will default on the loan.
Some of the best news for homeowners these days is the incredible rise in equity.Recent reports from data companies Black Knight US homeowners have found that they have $ 153,000 in the best “tap” home wealth ever.
according to Investopedia“By using your equity, you can access the funds you need without having to sell your home or borrow a higher-interest personal loan.” Therefore, the last recession. More and more people are willing to do more to maintain their homes rather than leaving them like they do.
There is almost no foreclosure
Finally, another reason not to be afraid of the bursting of the housing bubble is the historically low foreclosure rate, even after the COVID-19 pandemic. PR Newswire Lenders’ foreclosures due to the 2021 foreclosure are reported to have decreased by 49% from 2020 and 98% from 2010. Combined with the highest equity ever, homeowners are unlikely to lose everything in foreclosure.
Need help navigating the real estate market?
Now that your fears of the housing bubble have subsided, it may be time to look for that new home so you can start taking advantage of its rising fairness. If you are having trouble navigating the current market, please contact the following real estate professionals: Stern team.. Whether you buy or sell, they can help your goals.