MINT HILL, NC – COVID-19 has caused plenty of chaos with just about everything in our world. Many are out of work and might be facing foreclosure or eviction. With home prices rising across the country, some experts are worried another housing bubble is on the horizon.
Some areas are seeing higher prices than others. Idaho is the highest and North Carolina falls about in the middle. However, more than 15 states are seeing prices skyrocket more than 7% compared to the same time last year, according to USAToday.com.
Inventory is Very Low
While prices are on the right, housing inventory is very low. In a balanced market, there is about six months’ worth of housing inventory. While this wasn’t the case before COVID-19, the inventory was trending toward six months’ worth in many areas.
The pandemic sent the inventory headed back in the other direction with very few homes for sale in Mint Hill, NC, and across the country.
Housing Prices are Outpacing Incomes
Another important factor to look at is where incomes are compared to housing prices. When housing boomed in the mid-2000s home prices were rising faster than personal incomes. This is starting to happen again.
Rent prices are also not keeping up with home prices. Both of these trends are very similar to what happened before the Great Recession.
The Difference Between the Great Recession and Now
When the market collapsed in 2008, it was driven by poor lender ethics and a collapse in the financing industry. Today, the lending programs are not the same, and finding a low-doc or no-doc loan isn’t easy. Of course, the Great Recession wasn’t fueled by a pandemic causing people to lose jobs, either.
The Federal Reserve is buying Treasury bonds to help keep interest rates down. As long as this continues the economy could be booming for a few more years. If they stop buying bonds and interest rates start to go up, the market could ship. Until that happens, housing prices will likely keep climbing.
It is possible, if homeowners cannot refinance or sell their homes, foreclosures could spike. This would add more supply to the housing market and push down prices.
There are many other factors with today’s market making it much different than the Great Recession market However, things are lining up in a way where there could be another housing bubble.
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