Housing Bubble 2020

Hey, everybody, it’s Janine Sasso, your local Chicagoland realtor. And today I am talking to you about the housing bubble. I’m sure you’ve heard the talk. People, again, are talking about the housing bubble. So is there one? Do we have to worry about one? Let’s get into this a little bit and examine what really makes a housing bubble. It always starts with the fact that people perceive home values to rise faster than what they should. They see homes flying off the market, going to get multiple offers going to buff list price and naturally people start to worry because they are remembering that this was an event that led up to our market crash in ’07 and in ’08, one of the big differences between a healthy market was rising prices, though, and one that is unhealthy is the fact that you need to analyze who is driving the sales. Because if the sales are driven by speculators, people that are looking to buy property and then turn them over in a short period of time for a high profit, then this is definitely not a good price increase we should be looking at.

The other part is spectators that have been driven to buy because the interest rates were low and they have gotten this fear, we call it FOMO. So it’s the same principle, the fear of missing out. When they do see the prices increasing, they are jumping the gun to get in on the boat. Maybe they would have waited if prices were on a slower rate. Maybe they would have taken a little bit more time. That influx of spectators all coming into the market is definitely something that contributes to a housing bubble. Now spectators are starting to question the increasing prices of homes value. They are starting to become timid and they are starting to draw out of the market. This is when our prices are starting to rapidly fall. The confidence in the marketplace diminished and disappears and the prices are becoming lower and lower. Our housing bubble is full blown at this point.

Loan terms are also a contributor. It was a lot easier to get more buying power because lenders would help the borrowers make it work. Now there are more regulations in place to prevent this part, but when this happened, borrowers were just going out, they were getting easy mortgages and they were oftentimes using what we refer to as an arm. It’s an adjustable rate mortgage where you were paying upfront and this is where eventually things got caught up. And for some people they weren’t able to catch up, at which point, you know, some people ended up losing their homes. So is there a housing bubble today? And the short answer to that one will be no. The last big recession after 2007 was in the 1920s. Now we are only about 15 years old, 13 years in from that one. We have long got gotten rid of some of the loan types that were responsible.

We have adjusted our regulations and we have also done more research on what caused it so that we can be more prepared and we can eliminate some of these factors. The market will regulate itself. It will go up, it will go down. But as for the near forecast, we are not expecting and housing bubble for 2020. So I hope this build your confidence it was a little bit more of a dry material today. I hope it made it a little bit fun. If you have any questions, give me a call or you can also email me your questions and I look forward to talk to you next week.

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