Why The United States Housing Market Is Not A Bubble
With increasing housing demands and housing prices, many investors are wondering if the US housing market is a bubble being further inflated by recent events. Experts say that it isn’t.
Even before the pandemic, housing market demands and pricing were already rising along with a relative shortage in supply. When the pandemic arose, many homeowners felt urged to buy a home for several reasons, including the benefits of working from home and the opportunity to capitalize on low interest rates. Many homes were sold to bidders. And despite this, experts still don’t consider the US housing market to be in a bubble.
Oversupply of inventory causes bubbles
When it comes to housing offers, there is a 5.24 million unit shortage. This shortage was caused by the inability of residential construction to keep up with the 2011 demands. Instead of building homes, home builders are failing to accomplish several housing projects. A bubble means having a supply increase amidst a decrease in demand. What is currently happening is the opposite of this dynamic. Supply shortages have been rampant alongside the increasing housing demand.
On the contrary, 2008 experienced an oversupply in houses. This combined with the subprime mortgage market led to the housing crash in the same year.
The market is expected to recover
The world economy is still in recovery from the pandemic. In response, the Federal Reserve has guaranteed low-interest rates for quicker economic growth. Once back to its normal phase, the economy is expected to make a steady recovery, which is when the Federal Reserve will likely gradually increase interest rates to prevent over-inflation. These market fundamentals are what drive movement in the economy. The situation would look much bleaker if the Federal Reserve did not make adjustments during these uncertain times, however, thankfully, they have.
Suppliers need more time to adjust to constraints
Compared to the previous year, there was a total of 23.1 percent increase in construction input prices, according to the ABC (Associated Builders and Contractors). The input price increase and supply chain disruptions have put construction workers and builders in a hard situation. In this time of economic crisis, building affordable homes is becoming harder than before due to the increase in material prices. This is expected to continue until the world is vaccinated completely.
Also, construction laborers are hard to find. Despite having materials, the shortage in labor is becoming the bigger problem and is expected to persist until the pandemic is over. The lack of manpower hinders the builders from building houses to meet the housing demands.
Hence, these reasonable facts are why experts have concluded that the housing market in the US isn’t in a bubble. There is a continuous increase in the prices of materials, supplies, and even laborers. To equate this, the housing prices are increased to meet the housing demands. Investors are looking to seize the opportunities with fraction real estate ownership, made possible through cryptocurrency platforms that enable investors to buy and sell real estate tokens. For those who are looking to “get into” the housing market but haven’t been able to save enough for a down payment through a traditional real estate purchase the RealT fraction real estate platform gives investors the ability to purchase a fraction of a property. Overall, the housing market is still in a good situation despite this global health crisis. There are just some adjustments and increases, yet the demand is still at its peak.