I think I have heard this term more in the last 3 months, than I have in my whole Real Estate career!! So, “Are we in a housing bubble, and will it bust?” We get asked this question usually right after the most popular question, “How is the market?” I think we need to start with what is a Housing Bubble??
According to a recent article written by Rocket Mortgage:” A housing bubble (aka a real estate bubble) is generally defined as a period of unexpected or unusual growth in demand for real estate and housing, paired alongside a sudden or uncommon spike in home pricing. As alluded above, these circumstances occur when demand greatly outpaces supply and home buyers are faced with a limited choice of options, causing prices on available houses to go up as a result. The trouble with this scenario is that (a) investors and speculative buyers are often prone to bidding up the market, causing home prices to rise significantly and (b) when supply eventually realigns with demand, the bubble can “pop” so to speak – causing a rapid and pronounced dip in the number of home sales and the average price of homes.”
Many of us have lived through and experienced a similar situation when the Real Estate market tanked around 2008. The difference in that era was poor lending practices. Putting buyers into homes with no down payment(causing them to basically be upside down when everything shifted), and approving them for loans that they really could not truly afford. We are in a different era real estate wise:
1) West Texas has always been somewhat more sheltered from the housing fluctuations we see on the East and West Coast because we have always been more conservative in our lending and buying practices.
2) Interest rates are steadily rising which we have already began to see a leveling off if you will in the market. We are still receiving multiple offers, but crazy offers tens of thousands of dollars over asking are starting to decrease.
3) We still have low low inventory. Builders can’t build fast enough mainly due to product/shipping delays. Lubbock is steadily growing and the housing market inventory could take years to catch up fully in my opinion.
So are we in a bubble? Perhaps we are. Will it burst? Not any time soon based on the research we have done and the local market we have seen. Even when the market does start to correct, which it always will, we will not seen the ‘fallout’ that we saw in the 2008 era.
