3 Reasons We're Not in a Housing Bubble

With homes in the Tampa Bay area and across the U.S. still selling at record levels that haven’t been rivaled since the mid-2000s, you may be starting to worry that we’re in a housing bubble about to pop. Housing bubbles can occur when the demand for real estate increases so much that it outpaces supply. Such great demand will cause investors to rush to invest in the market since they predict rise will only continue to grow. This drives up housing prices and demand.

Eventually, if there’s a bubble, properties are valued at prices that are much higher than their actual worth. This triggers demand to go down while the supply remains high. When demand drops, the prices of homes will sharply decrease. This signifies the bubble bursting. So is this what’s happening in the U.S. housing market right now? We have some pretty good reasons to think otherwise!

History Disproves the Existence of a Housing Bubble Right Now

History is always the best indicator of the future. If you look at the last 80 years, home prices have almost always increased year-to-year. In fact, there have only been seven times when this didn’t happen (less than 1% of the time). And five of those seven times were all during the most recent housing bubble collapse. This means, generally speaking, it’s almost always accurate to predict an increase—not a decrease—in house prices.

The Demand Isn’t as High as You Might Think.

If you’re a newer homeowner, you may think this is the most significant demand there’s ever been in the U.S. housing market. But, as we already said, that isn’t true. Demand is still lower than it was back in 2005 and 2006. A big part of that demand also wasn’t organic demand. Many buyers were investors who wanted to take advantage of increasing demand by fixing and flipping properties.

The biggest trigger behind a housing bubble is when people start behaving speculatively, just like these investors did. Right now, the demand is driven by actual buyers, not investors acting on speculation.

Supply is Genuinely Low

Right now, the housing supply across the country isn’t low merely because of eager buyers. It’s down because it’s genuinely low. In fact, this is the lowest supply we’ve had since the 90s. There is inventory available for less than two months’ supply. Ordinarily, there should be six months’ worth of inventory.

Supply in certain areas of Tampa Bay is even lower. In Sarasota, the amount of single-family home inventory lasts less than one month. With such low supply and high demand, a price increase is only natural and does not mean that a housing bubble is being created.

Work with HOMM for Your Next Real Estate Move

If you’re worried about the housing market’s current state, you can calm your fears with these facts. Buyers and sellers in the Tampa Bay area can have peace of mind. Whether you’re looking to buy or sell property this year, HOMM can help! Our brokerage offers you personalized service backed by years of experience. To get started, contact us today! When it’s time to list, HOMM Real Estate Services knows the ins and outs of Tampa and Brandon Real Estate with decades of experience. Contact us today to get started on the selling process.

HOMM Real Estate Services, located in Brandon, Florida, Tampa is focused to Hillsborough, Pasco, and Polk Counties. As a full-service general real estate company, we specialize in general real estate, home buyers, home sellers, new home construction, rentals, tenants and landlords, and property management.