Are We in a Bubble?

By maryellen August 24, 2021

by Fran Lichtman

Are we in a real estate “bubble”?

Many people are incorrectly referring to the current frenzy in the market as a “bubble”.  Here is the reality. A bubble is caused by a temporary condition of overvalued prices often caused by speculators. In the 2000’s, there was a true housing bubble that was caused by the now-infamous loose lending conditions and existing government policies set up to promote home ownership.  A “bubble” is generally a condition that results from intentionally created actions.

Home buyers for the past 16 months have been purchasing for healthy reasons. Low interest rates and the ability to work and school from home are two. The benefit of increased savings, especially if they have moved from higher priced markets to some of our local suburban towns, is another reason.  

Home values currently continue to be driven by low supply, high demand and low mortgage rates. The buyers who are waiting for home prices to take a dive will be in for a disappointment. There may be a slight correction at some point but it is not on the radar at this time. Inventory is expected to remain restricted for the near future which will keep demand and prices high.

Recent buyers who have purchased at some of the highest prices often comment about whether it was a smart move. How long will they have to live in the house in order to gain equity? Reality is that there are long terms advantages of homeownership no matter what. If you plan to stay at least five years, experts feel that you will be fine.

During your ownership, there are not only the tax benefits and the fact that owning works as a forced savings plan but it also anchors a family socially and economically into a community and schools.