In 2008, we saw a great recession and consequently also a housing bubble. The question arises that in 2020 and 2021, are we again in another housing bubble? As Coronavirus pandemic caused a severe blow to the economies of almost all the countries of the world. The real estate and housing sector was no exception and was hampered significantly. The prices rose up exponentially and buying dropped with the same speed.
Fortune, a magazine hailed by many, recently published a story on the topic with a conclusion that no, we are not in a housing bubble. The magazine declared that there was no question that real estate in United States was on fire. There was seen a 11% year-over-year surge in the latest Case-Shiller Index data.
The reasons for not having a housing bubble:
Compared to 2008, we are not in housing bubble in 2021 because of:
Credit Worthy Borrowers:
There is no denial of the fact that housing prices are increasing but this is not a subprime crisis. Loans are mostly being made to those with high credit scores and sizable down payments, the exact opposite of the subprime housing boom.
The supply of existing home sales on the market is as low as its ever been on record going back to the late-1990s.
Better balance sheets
Another reason this is nothing like the subprime crisis is the state of the U.S. consumer’s finances. A combination of falling rates, some trepidation following the last crash and a healthy dose of stimulus payments mean the U.S. consumer is in better shape than they’ve ever been coming out of a recession
Look elsewhere for a bubble
If you want to call a housing bubble somewhere, there are much better options in other countries.
Prices in Canada and the UK have handily outpaced the United States this century. Since 2000, the UK House Price Index is up more than 200%. Housing prices in Canada are up over 260% this century. The Case-Shiller National Home Price Index for the United States is up 139%.