Friday, July 1, 2022 / by Laura Larson
- The recent growth in home prices is because of demographics and low inventory
- Credit risks are low because underwriting and lending standards are sound
1. Low Housing Inventory Is Causing Home Prices To Rising
The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.
There were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s still a shortage of inventory, which is causing ongoing home price appreciation.
2. Mortgage Lending Standards Today Are Nothing Like the Last Time
During the housing bubble, it was much easier to get a mortgage than it is today. There is a big difference between the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the years after.
A majority of experts agree we’re not in a housing bubble. That’s because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today. If you have questions, connect with Laura Larson now to discuss why today’s housing market is nothing like 2008.