Housing Bubble About to Burst? Here's What You Should Know

• Author: Jessica Williams
• Posted: 2024-10-01

Even today, people are still both recovering and talking about the housing market crash of 2008. After millions of people lost their homes, banks and even homeowners themselves vowed never to return to the practices that led to one of the most devastating economic downturns in American history. But, unfortunately, that was short-lived as consumers continued to purchase homes that they couldn't afford, and banks continued to provide mortgages that were no good. But one might say that the housing market is today healthy, and homes are selling for twice or sometimes three times what they're worth. Yet, it is that fact that has made people worry that we're in a housing bubble that is on its last legs. So, how worry should you be, and what is causing this concern? The following covers some of the most important events occurring at the moment and that point towards the possibility of a housing bubble that is about to burst.

2021 Downturn

At the time of this writing, 2021 is half over. During this first half of the year, U.S. home sales have fallen for the fourth straight month. Market experts have pointed to the fact that there is currently little to no inventory on the market to meet demand. This has caused the homes that are available on the market to skyrocket in price, with certain properties having multiple bidders at the ready.

Why is Inventory so Low?

Unlike past years when the market could point towards a specific reason for low inventory, the market today can point towards a whole set of reasons for why this is occurring. Let's begin with the pandemic of 2020-present. Because so many people were laid-off from work as well as the halting of non-essential work, there was simply no demand for new homes, and thus, not enough materials were being created. When shortages occur, the price of those materials increases. This is particularly true when it comes to lumber. Today, the price of lumber is so high that it has caused homeowners to avoid building homes and manufacturers from starting new projects. So, as you can see, the pandemic caused a trickle-down effect that led to further reasons for why the market is so expensive at the moment. It must be noted that this information was gathered by the National Association of Realtors and only applies to single-family housing.

Population Growth Since 2008

In addition to the conditions created by the pandemic, there are many other factors that need to be taken into consideration when talking about the shortage. In particular, the difference in popular between 2008 and 2021. Since 2008, the U.S population has grown by 25 million people. Many of those new citizens are also within the age where they are about to start buying new homes. With 25 million new people in the market, you can quickly see why inventory has diminished so greatly, especially within highly sought-after cities.

What Experts Recommend Buyers Do

If you were thinking about jumping into the real estate market right now, many experts are warning about going that route. This is because any home you obtain is not only going to be overvalued but likely to come crashing down in value. In many cases, this is going to be much sooner than later. Again, this is because experts see the housing bubble bursting in the near future.

Bidding Wars

Other than expensive lumber, housing experts point towards an unbalance in the bidding war between institutional buyers and individuals. Institutional buyers are companies and organizations that invest on behalf of other people and thus hold a lot of buying power which the individual homebuyer is simply not going to be able to beat. This means that available home prices are going to continue to be pushed and pushed even higher as the months pass by.

Bubble Bursting Soon?

In the end, it is not the evil practices of mortgage lenders nor people buying homes that they can't afford that are going to cause another housing bubble to burst but rather a simple lack of supplies and too much demand. Unfortunately, if this does not balance itself out soon, the American people are likely to experience the burst of yet another housing bubble.