Is the U.S. in Another Housing Bubble

As we finally see the first real recovery since the recession, home values across the nation have been steadily rising for the past few years. But have they been rising too fast? There has been some concern from experts that we may be entering a new housing bubble, much like the one in 2007 that caused the housing crisis and subsequent recession from 2008. And the worrisome thing about bubbles, is that they are always bound to burst.

So are we entering a new housing bubble? The experts are split. While some are claiming that the market is rising far too quickly, and will soon emulate the crisis of 2008, others are urging us not to jump to conclusions quite so swiftly. Lawrence Yun of Forbes says that “the suggestion of a new bubble is misplaced.” He gives three reasons why this is the case. First, the new, far more stringent rules and regulations for receiving a loan are putting a halt to the many dangerous subprime loans that we saw ten years ago. Receiving a loan is no easy process these days, and good or bad credit is far easier to check up on than it used to be.

Second, he points out that, even though home prices are climbing fast, mortgage rates are still low, and for the most part affordable for prospective buyers. People are no longer having to stretch outside of their budgets. Third, there simply isn’t the excess housing supply that would normally lead to a bubble. Developers are more cautious, and we arguably do not even have enough houses to supply the current demand. So, though one could still be rightly concerned about a housing bubble, it looks like for the near future we are in a pretty good place. There is reason to be cautious if you are entering the housing market, but no reason to panic like it’s 2008.

So what should a prospective real estate investor think about before entering the market? Here are some tips.

 1. Money first.

What got so many people into a terrible situation during the last recession was the tendency of lenders to hand out loans to people who couldn’t afford them. It might be tempting to go for something out of your range if you see a good rate, but it is essential that you save up some money first, work out a sensible budget, and stick to it.

 2. Go fixed rate.

Adjustable rate mortgages can seem appealing, as the initial premium will be quite low. However, these will ebb and flow with the market, and though they are a good idea for some people, a fixed rate mortgage guarantees that you know what you will be paying throughout your entire loan period.

 3. Check out local markets.

Technology makes it easy to keep up with current trends. You can use online resources to check out local market trends before buying real estate in that area. For example, you would visit a Georgia MLS to check in on trends in the city, and also find some property that will not push you out of your budget comfort zone.

 4. Take advice from an expert.

There are professionals out there who are readily available to help you make sure that, even if we are in a bubble, you are protected should it burst. Work with a finance expert to figure out how much you can realistically set aside for a loan, and don’t go against their advice. You can also work with a realtor to find property that fits your budget.

If you follow these simple tips, you have no need to worry about the future. All you need to do is earn the money, and find the place that is perfect for your first foray into real estate. Good luck!

By: Vincent Stokes 

Tags: business, Housing Bubble, USA Economy

Share it.