We are in a very unusual market from the standpoint that there’s low inventory and prices are extremely high. A lot of people seem to think we are in A real estate bubble, also referred to as a “housing bubble,”. A housing bubble occurs when the price of housing rises at a rapid pace, driven by an increase in demand, limited supply, and emotional buying. Once speculators recognize that housing prices are on the rise, they enter the market, further driving up demand. The phenomenon is called a bubble because at some point it will burst.
Back in 2005-2006 there was a tremendous amount of inventory and people were able to get loans with very little money down, the mortgage rates were adjustable, and a lot of people found themselves in a serious problem when those rates started to rise. In today’s market, we are in a situation where we have very low inventory and high demand. We have an influx of people from high tax states to the lower tax states, therefore we have a lot of people looking for homes.
This type of market is predicted to be sustained through the next year according to the housing analyst. Our interest rates are extremely low, and people are putting more money down on their mortgage loans. Rising home prices and recession memories have convinced some buyers that a bubble will pop, and prices will drop. But it is just too much demand and too little supply. So, the question of whether we are heading toward a new housing bubble in some areas remains debatable.