Some buyers are concerned about buying at the top of the real estate market
Are you thinking about buying a home today but having doubts? There are some home buyers who are hesitant to buy a house because they fear a scenario where they buy a home at the top of the market and a recession hits.
If you are aware of the real estate happening, especially last year, real estate markets across the country were in a hot frenzy. There’s short supply and more demand in houses which in turn drive the home prices up quite a bit. It was the craziest market we’ve ever seen, buyers competing from each other, homes coming on the market already in contract, buyers doing different tactics to land a deal, and bids going far over list price.
The rise in housing prices and these tales make it seem we’re in a housing bubble that is inflating ready to pop anytime. Like in 2006 and 2007 when everything was pretty incredible and then the housing market crashed and plenty of homeowners didn’t know what hit them.
Should you be concerned we’re in a housing bubble?
Well, no. The drivers behind today’s housing market look quite different from the 2005 – 2006’s frenzy. Back then, it was easier to qualify for a mortgage. Underwriting standards are much higher now. Before, construction activity largely outstripped demand. Today, supply is falling and construction is still in a catching-up mode. Also, today’s rising prices stem from limited supply and steady demand for houses as the pandemic and remote working spur people to move or relocate to another state.
Beyond the supply, demand, and funding aspects differences from before and now, the financial crisis and recession were also brought by FAS 157, the mark-to-market accounting rules of illiquid assets, and how it forced banks to value rarely traded assets similar to more frequently traded ones, leading some solvent banks to appear insolvent. Fortunately, FAS 157 was revised several times since 2008 to avoid a similar problem. Also, non-banks make a considerable amount of the mortgage lending business today compared to 2008.
Is now a good time to buy a house?
Despite a pandemic in its third year, the housing market is still strong right now. So, should you bide your time to buy in the hope that the market slows down? Or could we see prices rise further in 2022?
There is no denying that buying a house is more expensive than 12 months ago. House prices increased by more than 17.1% in the year to December 2021, according to the GGAR figures. The median sales price in Greenville was $275,500.
If you’re debating whether to buy a house or wait, here’s what to keep in mind: there’s no magical formula to buying a house. Take the time to find the property that meets your practical, financial, and aesthetic objectives.