“Once bitten, twice shy,” so the wise men said. You’d probably wonder how the proverb relates to housing and anything to do with homes. Well, recently, the rise in home prices has gotten both prospective buyers and agents scared. Additionally, with all the market activities we have been experiencing lately, probably everyone is scared that we would be heading into another market crash.
Following the saddening, most recent housing bubble collapse, where millions of people were rendered homeless, everyone is too keen to avoid relieving the 2006-2014 era. This fear has left many asking, “Are we in a housing bubble?” Well surprisingly, the answer is no, we are not in any housing bubble anytime soon. However, from recent research, it was concluded that we are experiencing a housing vacuum, where there is a high demand for homes, but a low supply.
Additionally, Unlike the factors that led to the previous market crash, other factors suggest that we are not in any housing bubble soon.
Three key factors that suggest that we are safe from a housing bubble:
#1 Advanced lending standards
Loose mortgage practices were one of the main reasons that led to the fall of national banks and other mortgage institutions. However, when making the adjustments, the fed set up strict regulations which included serious checking of the borrower’s credits and assets and getting illegal loans. These strict rules will make sure to protect the housing market from dipping.
#2 Growth in house prices
April 2020 surprised many by offering a booming housing market window regardless of the announcement of the Covid 19 pandemic, as many took advantage of the low mortgage interest rates which stood at 3%. The rate is estimated to increase to up to 8% in 2021. The rise is intended to curb cash prices from falling.
Equity is the portion of your home’s value that you own. A rise in house price would mean a rise in your equity. Additionally, your equity would secure you from default in case your house value falls. Equity encourages one to live in their home for longer.
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