Two Reasons Why Today’s Housing Market Isn’t a Bubble

Abstract

A recent survey from Pulsenomics asked over one hundred housing market experts and real estate economists if they believe the housing market is in a bubble. Low Housing Inventory Is Causing Home Prices To Rise The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. As the graph below shows, there were too many homes for sale from 2007 to 2010, and that caused prices to tumble. Today, there's still a shortage of inventory, which is causing ongoing home price appreciation: Inventory is nothing like the last time. Prices are rising because there's a healthy demand for homeownership at the same time there's a limited supply of homes for sale. Odeta Kushi, Deputy Chief Economist at First American, explains: "The fundamentals driving house price growth in the U.S. remain intact.... The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high." 2. That's because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today.