Most people think we’re in a real estate bubble these days, but are we?
Are we currently sitting in a real estate bubble? By far, this has been the most-asked question I’ve received lately, so today I’m answering it in detail.
A recent Realtor.com survey showed that 77% of consumers believe we’re in a market bubble, and I can understand why they think that. We all remember the financial crisis of 2007 and 2008 and that it messed up real estate. It may feel like our market right now is similar to back then. However, the increase in prices in 2007 and 2008 did not cause the real estate meltdown, and it won’t incite one now. 2022’s market is very different than that of ‘07 to ‘08.
Our supply of homes is at a historically low level, and the number of new construction homes entering the market has been below the 50-year average for the past 14 years. The U.S. population has continued to rise, and millennials (the largest segment of the population) are in their prime buying years. The great migration from the Northeast and Midwest to the South is real; people have realized they can get out of the colder climates and come south to better weather and a lower cost of living. Employment numbers are ultra-strong here in South Carolina, specifically in the Upstate, and many companies are still hiring.
Also, rental rates have escalated even quicker than home values, and plenty of people see that as an incentive to buy instead of rent. All this means home demand is still extremely high. Some people think the growing interest rates are concerning, but all these moving people need a place to live. The combination of high demand and low supply will allow home values to continue to appreciate, maybe not at the breakneck speed of the last two years, but likely around 4% to 6% each year.
Ultimately, we’re not in a real estate bubble—we just have especially low supply and incredible demand. If you have any questions about our market or real estate in general, call or visit my website. I would love to help you.