Monday, November 9, 2020 / by Vyral Marketing
I Hate to Burst Doomsayers’ Bubbles, but the Bubble Isn’t Nigh
There are three main factors to look at when determining whether or not we’re heading toward another real estate bubble, the first of which are vacant homes. Before the burst of the 2000s bubble, there were tens of thousands of homes sitting vacant. Many homes were purchased on speculation, meaning that folks would buy houses and do nothing with them simply in the hope that prices would rise dramatically, allowing them to sell for top dollar later down the road. That strategy worked well for maybe a year at best, then it completely fell apart.
Thankfully, unlike in 2006, there are very few homes sitting vacant at the moment, and here’s why that matters: If we did experience a sudden downturn, the market wouldn’t immediately be flooded with these ‘speculation’ properties. In today’s market, most homes are either owner-occupied or rented out.
Second, consider the cost to own versus the cost to rent. Before the 2000s bubble, rental prices were declining, due in part to that abundance of vacant homes; whenever a home was put up for rent, very few people wanted it simply because they had so many other options to choose from. Conversely, when a home gets put up for rent in today’s market, there are 10, 20, or even 100 prospective tenants vying for it. With fewer properties to choose from, rental prices are only going up.
While home prices are also increasing, low mortgage rates have greatly leveled the playing field for homebuyers. Homeownership today is more affordable than renting, and in many cases, it’s even more affordable than homeownership in years past.
"On the whole, lending has become more ethical and sustainable."
Third, today’s buyers actually have to qualify for loans—they’re not being handed out like candy, as was practically the case before the last bubble. Back then, when somebody wanted to qualify for a loan, there was a good chance that they didn’t have to show any documentation. In fact, in some cases, people didn’t even have to prove they had a job!
Thankfully, that’s all changed; nowadays, they not only have to prove they have a job and the funds for a down payment but also the likelihood that they’ll stay employed for the foreseeable future. On the whole, lending has become more ethical and sustainable, and that’s yet another safeguard against a real estate bubble.
So, if you know someone else who’s worried about another real estate bubble, I encourage you to share this video with them. As always, reach out via phone or email if you have real estate questions. I’m more than happy to hear about your specific situation and assist with your buying or selling needs.