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This Bubble is Different

According to a recent WALL STREET JOURNAL article, the residential real-estate market is having its best year since 2016. It’s a housing boom “ignited by the pandemic.”

Builders, architects and their suppliers are very busy, with 12-18 months of new work in their pipeline, but nervous that we’re in another housing bubble which will burst. Our memory of the last great recession remains vivid. The rising cost of building materials, supply chain disruption and a shortage of labor adds to our angst.

But low interest rates, new younger buyers entering the market and a rethink about the importance of home, are all contributing to a healthy market.

What’s different about this housing “bubble?” According to the WSJ “mortgages are stricter, down payments higher and a tight housing supply is supporting higher prices.” The National Association of Realtors pegs the median price of a new single-family home at $346,000 and going up. “The current housing boom is far more stable than the last one and poses fewer systemic risks.”

People who already own homes gained a collective $1.5 trillion in equity in 2020, according to CoreLogic. Nearly one in four home buyers paid $500,000 or more for a house between April and June 2020. Homeownership rose from 63.7% in 2016 to 65.8% in the fourth quarter 2020. Most home buyers lately, have credit scores of 720 or better.

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