THIS IS NOT YOUR FATHER’S HOUSING BUBBLE

Home values have been increasing in some markets so rapidly, recently, that some have speculated that we are creating another “housing bubble”.  Economists say this is not the case.  The cause of rapidly increasing home selling prices, and multiple offers with selling prices going considerably over asking, is inventory related.  The inventory of homes for resale is the lowest we have seen in 30 years.  When you combine the extremely low inventory with strong demand and low interest rates, the result is predictable.  Home values will go up.  However, we are already starting to see signs of more sellers preparing to bring homes on the market.  That will mitigate the price escalation.  As the economy slowly recovers we will
probably see a rise in interest rates, and that may dampen demand a bit.  Finally, it is important to remember the cause of the housing bubble of 2005/2006.  In that case we had too many unqualified buyers purchasing homes which they could not afford.  Extremely poor lending practices existed prior to the bubble and those practices resulted primarily from poor national public policy whose design was to put as many people as possible into a home.  In essence, the “home ownership dream” became the “home ownership right”.  Click here for more details on this story.