1. We aren’t in a housing bubble
The U.S. is not in the midst of a housing bubble, which is when the market price of homes sharply increases due to rising demand that outpaces supply.
The spike in home prices since the onset of the pandemic isn’t an indication of a bubble because the demand is coming from well-funded buyers who are competing for very few homes.
2. Competition is easing
The once-intense competition to nab a home is declining as more homeowners postpone their housing search. The brokerage noted that many homeowners were either burned out from their search or “priced out.”
3. Home prices are still climbing
Although there is less competition in the market, homebuyers still have to make their offers stand out.
To do so, homeowners will likely have to shell out more cash, effectively driving up housing prices even more.
However, in order to better navigate the market, consumers shouldn’t rely on asking prices as a “good gauge of the values of a market” rather than recently sold prices.
So pay much less attention to the percent over asking or under asking that a property sold and look at what it sold at compared to the most recent comparable sale.
4. Relatively affordable places are getting more expensive
Certain cities around the country such as Phoenix, Las Vegas and Sacramento have been popular destinations for homebuyers.
However, with prices rising, these once-affordable spots are falling out of reach for not only newcomers but locals as well.
5. There aren’t enough homes for sale
Supply remains a big issue. In fact, some homeowners won’t even place their home on the market out of fear of “entering the high-priced market as a buyer.
Additionally, “builders are held back by high lumber costs and labor shortages,” the brokerage said, adding that this is creating an unbalanced market.
Prices and competition won’t settle until the “market is more balanced.”
Even when the price declines in the near future, homeowners benefitting from low mortgage payments for the long term will likely wait out the market and not sell until they gain equity back.
As a result, the inventory of available homes will remain low and therefore prevent any sort of substantial drop in values because there will always be enough demand from buyers who have a required move for relocation, more space, less space.