HOUSE PRICE BUBBLE ?????

Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market

House Price Bubble, Not Right Now

These data are more compelling data points that home prices are not getting us back into bubble range.

I agree with the argument FOR THE TIME BEING!!!!.

What I mean by that is this. Essentially, home mortgage lending is a federal government monopoly.

Almost every mortgage lender makes loans that conform to federal government guidelines, then sells the mortgage note to Fannie Mae or Freddie Mac. In other words, they make their profit immediately and all the risk is taken out of the system for the lender.

At some point in time, some set of government bureaucrats will decide that the economy needs a boost. The perfect way to do, STIMULATE HOME SALES AND NEW CONSTRUCTION.

Just what led us to the great meltdown that we are still not totally out of.

Great time to buy a house and build your net worth. Just keep your eyes open for the danger signals.

There are some industry pundits claiming that residential home values have risen too quickly and that current levels are on the verge of another housing bubble. It is easy to see how this thinking has taken form if we look at a graph of home prices from 2000 to today.

Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market

The graph definitely looks like a roller coaster ride. And, as prices begin to reach 2006 levels again, it “seems logical” that the next part of the ride would be downhill. However, this graph includes the anomaly of the price bubble and the correction (the housing crash).

What if the bubble & bust didn’t occur?

Let’s assume that instead of the rise and fall in home prices that we saw last decade, we just had normal historic appreciation from 2000 to today. According to the 100+ experts that are surveyed for the Home Price Expectation Survey, normal annual appreciation for residential single family homes from 1987 to 1999 was 3.6%.

Starting with the median home price in 2000, we added 3.6% to it each year since then. Here is that graph intermixed with the above graph.

Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market
What this shows us is that, had the bubble and crash not occurred and instead we just had normal annual appreciation over this period, prices would actually be greater than they are today.

Bottom Line

There is no reason for alarm as prices seem to be right in line with where they should be.

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