As soon as housing prices seem to rise, two questions spring to mind—and into headlines:
“What’s MY home worth?”, followed immediately by “when will THIS housing bubble pop?”
With current median selling prices up nearly $35,000 compared to the same period last year, it’s the latter (along with still-fresh memories of last decade) that have some buyers waiting on the sidelines. However, while experts have no idea how far prices will run, they can seemingly agree on one thing: we aren’t actually in a bubble.
And those that wait will likely regret it.
This Is A Different Housing Market
Take it from none other than a Morgan Stanley strategist who shared in a note to clients that the bank had a “strong conviction that we are not experiencing a bubble in U.S. housing.” Lawrence Yun, chief economist for the National Association of Realtors® seems to agree.
“This is not a bubble. It is simply lack of supply.”
The fundamentals behind the market appear to back up these assertions. While credit rates remain low, qualifying for them is still tight. Hardly any of the mortgages being issued include introductory periods or balloon payments. Risky lending practices have all but disappeared.
It was that last one that directly contributed to the disastrous end of the most recent bubble. Initially affordable payments were settled upon with the expectation that home values would continue to rise, and borrowers would then refinance to maintain their ability to pay. The combination of a plateau in home values along with increasing payment amounts turned into a tsunami of delinquencies, foreclosures, falling prices, and ultimately a housing crash.
This time, things are different.
Basic Economics—And A Pandemic
The truth is, the largest factor contributing to the skyrocketing prices we’re seeing throughout South Florida and beyond, is a lack of homes to purchase. At the end of this past March, there were only 1/4 the number of homes for sale than in July of 2007—near the peak of the last housing bubble.
The onset of the COVID-19 pandemic and the shift toward spending more time at home is the number one culprit here. Many are wishing for a change in lifestyle and are actively looking for new homes, while just as many have decided that the uncertainty surrounding the virus is as good a reason as any to stay put.
The result? Plenty of demand, and not nearly enough supply to meet it.
To Buy or Not To Buy?
So, should those waiting to hear a “pop” instead jump into a new home right away? Signs point to yes—while prices likely won’t continue to soar at a breakneck pace, they’ll likely continue to climb gradually.
If you’re unsure whether now is the time to buy or sell in South Florida, the best move is to contact a local expert who understands the market—and can advise you on your next move. Contact The Pearl Antonacci Group today to learn more!