Market Update May 26, 2021

TL DW: MARKET UPDATE

Today I’m taking a backseat and giving a short summary to Windermere’s own Matthew Gardener’s market update on the housing bubble. If you’re interest in watching his video in its entirety, you can find it here.

Here are the key takeaways…

Introduction:

• Home prices have rising faster than wages
• Wages up 30% since 2012
• Homes up 113% since 2012
• Does this mean bubble territory?

Last time bubble was created by:

• Government wanting to increase homeownership. Relaxing (aka completely removed) lending standards to low- and middle-income borrowers.
• Dotcom bubble popping. Fed lowering
  rates to avoid recession.
• 35% of mortgages originated in ’05 were Subprime/Non-prime ARM mortgages with “teaser” rates which reset to higher interest rates in 2007.

Not in a bubble this time because:

• Sales prices of houses increased less, year over year, than last bubble
• Inventory at record low. Lots of inventory last time b/c people tried to sell before their ARM interest rate increased.
• Prices rising due to supply and demand, plus cheap cost of borrowing. Less new housing starts.
• Housing speculation drove moving on average every 4 years (before 2009), now the average is every 8 years. This lowers housing turnover.
• Majority of loans (73%) going to those with credit score of +760
• Only 4% of homes in forbearance. No surge in inventory expected.
• 1 in 3 home owners have 50% equity in their homes.

There you have it! Thanks for reading