Real Estate Watch – Centermac SD
Is the Real Estate Market
The short answer is NO. Many people are concerned we will see another bubble in real estate prices, but I hate to break it to those folks that there is not one on the horizon. The last bubble a decade ago was fueled by irresponsible lending practices, over-building by home builders, and pure speculation. This created a perfect storm resulting in a major housing bust in 2007-2008. Today, qualifying for a mortgage is much more stringent, and loans are being issued to well-qualified borrowers. Inventory is at an all-time low and will continue to be tight as families debate whether to sell and move up, or stay and renovate their home.
So the question is: how long will values hold on? Realtor.org tracks the Housing Affordability Index, where anything with a measure over 100 means that housing is not too expensive for the average household income. In 2016 the index had a reading of 153, well above 100. In 2006 it had a reading of 108. In the next five years we are expecting to see Average Annual Household Formations rise to levels we haven’t seen since the Baby Boomers were buying their first homes. This indicates that future demand will be rising in years to come, helping to further stabilize values.
Lastly, according to pulsenomics.com, they are expecting an average cumulative house appreciation by 2020 of 18.7%. When we look at all this data combined, it gives us a positive outlook on home prices and clearly shows there is not a bubble coming any time soon. For those thinking about selling and moving up, now is a great time to consider, seeing that a bubble or drop in prices seems unlikely in the coming years. Overall, it is an ideal time to buy or sell your house!
Professional Real Estate Consultant
BRE # 02004228
Sr. Loan Officer