Why We Are Not Heading Toward A Housing Bubble

4 Reasons Why We Are Not Heading Toward Another Housing Bubble

With home prices continuing to appreciate above historic levels, some are concerned that we may be heading for another housing ‘boom & bust.’ It is important to remember, however, that today’s market is quite different than the housing bubble market of twelve years ago.

Here are four key metrics that will explain why we are not heading toward a housing bubble:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates
  4. Housing Affordability

1. HOME PRICES

There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.

Last week, CoreLogic reported that,

“The inflation-adjusted U.S. median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018.” (This is the latest data available.)

2. MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a monthly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Their July Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

3. FORECLOSURE RATES

A major cause of the housing crash last decade was the number of foreclosures that hit the market. They not only increased the supply of homes for sale but were also being sold at 20-50% discounts. Foreclosures helped drive down all home values.

Today, foreclosure numbers are lower than they were before the housing boom. Here are the number of consumers with new foreclosures according to the Federal Reserve’s most recent Household Debt and Credit Report:

  • 2003: 203,320 (earliest reported numbers)
  • 2009: 566,180 (at the valley of the crash)
  • Today: 76,480

Foreclosures today are less than 40% of what they were in 2003.

4. HOUSING AFFORDABILITY

Contrary to many headlines, home affordability is better now than it was prior to the last housing boom. In the same article referenced in #1, CoreLogic revealed that in the vast majority of markets, “the inflation-adjusted, principal-and-interest mortgage payments that homebuyers have committed to this year remain much lower than their pre-crisis peaks.”

They went on to explain:

“The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the U.S. typical mortgage payment peaked, was about 6.7 percent, compared with an average mortgage rate of about 4.4 percent in March 2018.”

The “price” of a home may be higher, but the “cost” is still below historic norms.

Bottom Line

After using these four key housing metrics to compare today to last decade, we can see that the current market is not anything like that housing bubble market.

 

Related article: This Month In Real Estate: June 2018

When selling your house, don’t forget to STAGE!

 

Want to sell your house faster?  Don’t forget to stage!

Does furniture really make a difference in how your house looks to buyers? See for yourself…

Here are examples of BEFORE and AFTER “Virtual Staging” that we have done on our vacant listing to give buyers a better view – just one more thing our team does to help our sellers stand out.

Take a look at these statistics on the benefits of staging a home.

virtual staging the benefits of staging with indigo skye group

Some Highlights:

  • The National Association of Realtors surveyed their members & released the findings of their Profile of Home Staging.
  • 62% of seller’s agents say that staging a home decreases the amount of time a home spends on the market.
  • 50% of staged homes saw a 1-10% increase in dollar-value offers from buyers.
  • 77% of buyer’s agents said staging made it easier for buyers to visualize the home as their own.
  • The top rooms to stage in order to attract more buyers are the living room, master bedroom, kitchen, and dining room.

Be sure and ask Indigo Skye Group about our new “Virtual Staging” services!

 

 

Related article: Selling your house on your own could cost you…

The #1 Reason to List Your House for Sale NOW

If you are debating whether or not to list your house for sale this year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes for Sale

The National Association of Realtors’ (NAR) Chief Economist Lawrence Yun recently commented on the current lack of inventory:

“Inventory coming onto the market during this year’s spring buying season – as evidenced again by last month’s weak reading – was not even close to being enough to satisfy demand. 

That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”

The latest Existing Home Sales Report shows that there is currently a 4.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market, and 6.1% lower than last year’s inventory level.

The chart below details the year-over-year inventory shortages experienced over the last 12 months:

 

Anything less than a six-month supply is considered a “seller’s market.”

Bottom Line

Let’s get together to discuss the supply conditions in our neighborhood so that I can assist you in gaining access to the buyers who are ready, willing, and able to buy right now!

Independence Day Fireworks and Activities 2018 : DFW Metroplex

This week we will be celebrating Independence Day and there are plenty of opportunities to get in on the action!  Fireworks, family-style picnics, concerts, festivals, you name it.  Check out our list to find out what is happening in your area of DFW!  Be safe!

Independence Day Fireworks and Activities 2018 : DFW Metroplex

ADDISON

Addison Kaboom Town- July 3rd
www.addisonkaboomtown.com

ARLINGTON

Light Up Arlington- July 3rd
www.lightuparlington.com

Arlington 4th of July Parade- July 4th

www.arlington4th.org

Texas Rangers Post Game Fireworks- July 4th
www.texasrangers.com

BEDFORD

4th Fest
www.bedfordtx.gov

THE COLONY

Liberty by the Lake- July 4th
www.thecolonytx.gov

COPPELL

Parade Down Parkway- July 4th
www.celebratecoppell.com

DALLAS

Dallas Marathon Five on the Fourth- July 4th
www.bmwdallasmarathon.com

Red, White and Blues Music at the Dallas Arboretum- July 1st &4th
www.dallasarboretum.org

Red, White and Boom on the Bridge- July 3rd
www.kluv.radio.com/red-white-boom

Old Fashioned Fourth- July 4th
www.dallasheritagevillage.worldsecuresystems.com/event/old-fashioned-fourth-3

Fair Park Fourth- July 4th
www.fairpark.org

DENTON

4th of July Yankee Doodle Parade and Liberty 5K- July 4th
www.discoverdenton.com

DUNCANVILLE

Independence Day Celebration- July 4th

www.duncanville.com

FARMERS BRANCH

Farmers Branch Independence Day Celebration- July 3rd

www.farmersbranchtx.gov

FORT WORTH

Fort Worth’s Fourth- July 4th

www.fortworthsfourth.com

FRISCO

Frisco Freedom Fest- July 3rd & 4th
www.friscofreedomfest.org

GARLAND

Star-Spangled Spectacular

www.visitgarlandtx.com

GRAND PRAIRIE

Lone Stars and Stripes Celebration- July 3rd & 4th

www.lonestarpark.com

Fourth of July at Epic Waters- July 4th
www.epicwatersgp.com

GRAPEVINE

Fourth of July Fireworks Extravaganza- July 4th

www.grapevinetexasusa.com

IRVING 

Independence Day Parade- July 4th
www.cityofirving.org

Fireworks on Lake Carolyn- July 4th
www.cityofirving.org

LANCASTER / DESOTO

Old Fashioned Fourth Fireworks Celebration- July 4th
www.ci.desoto.tx.us

LEWISVILLE

20th Annual Freedom Festival and Fireworks- July 4th

www.castlehillsvillageshops.com

Little Elm

July Jubilee- July 4th

www.lakefrontlittleelm.com

Mansfield

Rockin’ 4th of July- July 4th
www.mansfieldtexas.gov

Midlothian

Independence Day Fireworks- July 3rd
www.midlothian.tx.us

MCKINNEY

Red, White and BOOM! Parade and Yankee Doodle Block Party- July 4th
www.mckinneytexas.org

Red, White and BOOM! Fireworks at Craig Ranch- July 4th
www.mckinneytexas.org

PLANO

Plano Lions Independence Day Parade- July 4th

www.id4planolions.org

All American Fourth Fireworks at Oak Point Park- July 4th
www.plano.gov

RICHARDSON

Family 4th Celebration- July 4th

www.cor.net

ROCKWALL

Fourth of July Parade and Fireworks Show- July 4th

www.playrockwall.com

Rowlett 

Fireworks on Main- July 4th

www.ci.rowlett.tx.us

SACHSE

Red, White and Blue Blast- July 3rd

www.cityofsachse.com

SOUTHLAKE

Southlake Stars & Stripes

www.visitsouthlaketexas.com

WAXAHACHIE

Crape Myrtle Festival and Parade- July 3rd & 4th

www.waxahachiecvb.com