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Are We in a Housing Market Bubble?

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In the last two years, home prices nationwide have gone up 34.4%. Just in the last 12 months, it went up 19.8% nationwide. That is unprecedented and we have never seen anything like it historically in the US real estate market.

So what are the factors driving these numbers? As we have talked about a lot of times on this vlog, the biggest reason that the housing market has been stable is the lack of inventory. And that continues to be the case until now. The inventory crunch is really fueling this housing market.

Earlier this week, the economists at Zillow published an article on why they thought that the inventory crunch is going to continue. They said that it is due to home builders being worried and fearful of the housing bubble or crash. Because of this, they are going to slow down their production of new built home. If home builders actually act on those fears and they do not continue to build, then it is will continue the shortage of inventory and will not catch up with the demands. A lot of people are making decisions out of fear as opposed to looking at the data and the information right now.

If you go further into this article by the economists at Zillow, they also say that they anticipate even more buyers to come into the market as even more millennials are coming into the marketplace to look for homes to buy. That will add to the demand versus the low inventory in the real estate market. Currently, we have only 450,000 homes nationwide for sale. That is down from 900,000 at the beginning of the year. If we go way back to January of 2016, there were 1.5 million houses for sale nationwide. Locally in the San Fernando Valley particularly in the Porter Ranch area which is zip code 91326, we only had 13 properties for sale last January. Right now, it is standing at 36 homes for sale. We know that the number is higher but if we go back to 2019 at the same time this year, there were 84 properties for sale. We are down to less than 50% of that number for the spring buying season. This lack of inventory is making a big difference right now in the marketplace.

On the one hand we are also seeing less buyers due to the lack of affordability brought by the increasing interest rates. The amount of buyers coming through is less but we are still seeing multiple offers with prices that are NOT less than the list price

“Based on the data and the facts, we are not looking at a housing market crash or a bubble.”

Blackstones’ Joe Ziddle summed it up best as he said recently, “Home equity is at an all time high and household balance sheets are strong.” Homeowners in California have an average of $95,000 in equity. “You haven’t had over building. You haven’t had a drop in credit or lending standards,” he noted. “Historically, housing ends up being more highly correlated to labor markets than it is to labor markets than it is to the mortgage rates,” he said. “As long as the jobs market remains relatively healthy, I think housing will as well.”

Moving forward, what does this mean for everybody? We will not see a market crash and we are not even in a bubble. This is more of a soft landing into a more normal market with just normal equity gains, not these double-digit appreciations of over a month.

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