Denverites don’t need to be told that the housing market has recovered from the crash of 2008; we’ve seen the rising prices and unleashed demand that prove it. With such high prices, many go so far as to wonder if we’re headed into another housing bubble.
Lawrence Yun, chief economist of the National Association of Realtors, isn’t one of them. In a recent column in Realtor magazine, Yun notes that contrary to those who see trouble coming, “hard facts suggest otherwise.”
Yun notes that the underlying conditions of today’s market differ from the bubble that burst in 2008. “Back then,” he writes, “credit was easy to obtain and home sales were running at more than 8.5 million a year (existing and new homes combined). New-home construction volume topped 2 million annually.
“By comparison, credit today is extremely tight, which has led to an unusually high level of all-cash sales.” Home sales are lower, as is new-home construction. Total mortgage balances have dropped over the last eight years, as well. “Home owners are paying their mortgages on time and few are seeking cash-out refinances.”
Yun admits that affordability issues are a concern. As sales costs increase, there’s a potential for buyers to be priced out of the market. Even so, he notes that mortgage rates are likely to rise soon, perhaps crossing the 6% mark in two years, at which time “either home prices will be flat or other forces will be evident.”
The real factor to watch, he adds, is job creation and “meaningful increases in income levels.” For the time being, though, Yun firmly believes we’re in the clear, with “no bubble or impending crash is in sight.”