Why The Housing Market is NOT Crashing Anytime Soon: Bubble-myth Busted!
There are a lot of people forecasting a bubble exploding in real estate, but they have been saying this for a year and it hasn’t happened. There is still a significant home shortage of about 1.6M housing units in the US and hedge funds and institutional buyers have been buying residential investment properties in large numbers.
Here is some info from the Freddie Mac study.
Existing Homeowners and Their Impact on the Housing Market
The housing market is primarily supplied by homeowners who sell their homes. They have been staying in place and this has caused a housing shortage.
Before the housing market crash in 2007, the average length of time someone lived in a home was about 5 years. As of May 2021, we have reached the historic high of 10.6 years! The fact that house buying power has increased this spring by approximately $7K when considering rising wages and low interest rates, does not seem to make a difference to homeowners that are staying put.
People are choosing to stay in place for a variety of reasons, but one reason that has not been talked about much is the baby boomers choosing to age in place rather than downsizing and adding homes to the housing supply.
“Analysis of the 2020 ASEC data reveals that the homeownership rate actually increased for baby boomers in 2020. While a 2019 study from Freddie Mac shows that if seniors and adults born between 1931-1959 behaved like earlier generations, they would have released nearly 1.6 million additional housing units to the market by 2018. As seniors continue to choose to age in place, there will be fewer existing homes available for sale.“
The fact that there is money looking for homes to buy is clear, however, if there are insufficient homes to buy, the housing market is unlikely to suffer a downturn. Millennials are at the age where the are ready, willing and able to purchase homes, interest rates are low, incomes are rising, and the economy is continuing to improve. These are all factors that support the current market.