Housing Bubble Myth

Dated: August 3 2021

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Is there a 2021 housing bubble? I hear this question almost every day. My short answer is no. For the long answer, please read on. In the early 2000s, unregulated loans coupled with low interest rates provided an opportunity for unqualified buyers to purchase a home. This increased the demand  for home ownership because there were more buyers than sellers. The basic economics of supply and demand rapidly drove prices up.  In July 2007, just before the market turned into the Housing Bubble of 2008, almost 85% of all home purchases in the Verde Valley were financed with a loan, many of which were  purchased by buyers that could not pay their mortgages. The bubble burst, and the housing market rapidly fell reaching its lowest point in 2009. In 2009, regulations were placed on the mortgage industry to protect buyers from what’s been coined as predatory loans. (See 15 U.S.C. § 1639(c) (Dodd-Frank Act § 1411) 1640 (Dodd-Frank Act § 1413)).

Fast forward to today’s quick rising real estate market. The Verde Valley has been in a housing shortage and real estate prices have been on the rise for several years now. Although the Covid -19 pandemic temporarily slowed the housing market in the 2nd quarter of 2020, it didn’t last long with out of state buyers and big city residents bringing their cash equity to our rural community. RURAL SPACE is now highly desired further driving up demand for this area. Over the last 6 months, nearly 45% of all home sales in the Verde Valley were paid for with CASH. All homes purchased with a financed loan are subject to the stringent regulations formed in 2009. It is not likely that unqualified buyers are purchasing homes in the Verde Valley. The price of a home in the Verde Valley has sharply risen because demand is up, and inventory is down.

But what about the eviction and forbearance moratoriums that expired July 31, 2021? Won’t we see a flood of inventory with foreclosures thus changing the dynamics of supply and demand? Homeowners or landlords that were subject to these pandemic -related moratoriums most likely can sell their houses now for well more than what they owe on a mortgage. I am not sure that the market will see many actual foreclosures.  We may see a slight increase in inventory from those homeowners that can’t pay due to the moratorium expiration, but I don’t believe the increase in supply will be out of reach with the demand for homes. For example, as of the day this was written, there are only 20 available homes in the town of Camp Verde. Even if the number of available homes quadrupled to 80 available homes, we would be in short supply of homes.   If you are wondering if you should sell your home, I would recommend a resounding YES! There are buyers! If you are considering buying a home, I would say do not wait. While I cannot predict what the future holds for any of us, I do not see evidence in the data of a housing bubble similar to the 2008 crash. Feel free to reach out if you have questions regarding the current real estate market, 928-300-0363.

Housing Bubble Myth

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AMANDA GAGNON

Amanda Gagnon is a tech savvy agent that loves the great outdoors! After graduating from Northern Arizona University with a Master's degree in Forestry and Wildlife Ecology, she worked for an entire d....

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