Is the Real Estate Market Too Good to be True?

Real Estate Market

Escalating home prices have home buyers and sellers worried that the real estate market is too good to be true. Real estate agents throughout the United States are being asked if we are in a housing bubble? The warning signs look very familiar to what we have seen in the past.

However, there are 3 key factors that suggest we are not in a bubble, so real estate agents can educate and calm their clients about the real estate market.


Inventory of Homes

Home values appreciated an average of 10% across the country in 2020. Experts predict this year’s growth will be closer to 5%. Buyers and sellers are worried that home prices are too high, and depreciation will follow.

However, unlike the housing bubble in the mid-2000s, the major factor driving up home values is that there is a shortage of inventory.

Typically, a home will sit around 6 months before it is sold. Today, the market is at 1.9 months, a historically low amount of homes for sale. Additionally, inventory has been declining for years.

The inventory level from 2005 and 2007 increased from 5 months to 11 months, an over-supply of homes that did not warrant the price appreciation that went along with it.

So, what drives the home appreciation is simply supply and demand. That is what we are seeing in the real estate market today.


Housing Mortgage Rates

Do you remember how crazy the housing boom in the mid-2000s was? The mortgage industry fed into the buying and selling frenzy making it easy for people to obtain home loans much higher than they could afford.

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Millennials are finally ready to purchase a home and out there looking to buy. The Covid-19 pandemic is also challenging homeowners to re-evaluate whether their home meets their needs. Some are looking at homes with additional space for a parent, or a home office, or a large backyard.

These two big factors, coupled with historically low mortgage rates, make purchasing a home today a good financial decision.


Home Equity

Economists, financiers, and real estate experts have gathered data to figure out why the housing and economic crash of 2008 crumbled the way it did.

Most will agree from the data that one of the biggest pieces of that catastrophic equation was equity or the lack of it.

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Homeowners in the mid-2000s were cashing out the equity in their homes. They were using their homes like banks or credit cards to afford more expensive items to keep up with the Joneses.

Sadly, this led homeowners with negative equity — the amount owed on a home was far more than what the house was worth. Then foreclosures and short sales followed, depreciating home values nationwide.

The real estate market and homeownership are much different today. People refinancing their homes over the last three years is less than a third of what it was compared to the three years before the 2008 economic crash. More than 38% of homeowners have paid off their mortgage, and 18.7% have paid off over 50% of their mortgage.

The positive equity puts today’s housing market in a much stronger place. It minimizes the risk of foreclosure and stabilizes home values across the United States.


Team Wenzel Talks about the Real Estate Market

One of the most important roles of the real estate agents on Team Wenzel is to educate our clients. We analyze data and get insights on the market, so our clients can make the best real estate decision. Wenzel Select Properties agents will provide our clients with home buying and selling educational materials, enhanced marketing analysis, and more.

Our experienced real estate team is here to help you find the perfect home for your lifestyle. One of our main priorities is to always look out for our client’s interests first and take the necessary time to find the right home that meets their budget.

If you are looking to buy, rent, or sell a home, contact Wenzel Select Properties. Our future real estate office is located in the heart of downtown Downers Grove at 4941 Main Street. We are minutes away from Interstates 88, 355, 55, 290, and 294. Our building renovations will be completed by the end of 2021.

Wenzel Select Properties real estate brokers are available to meet with you 7 days a week – Monday through Sunday. Call us today at (630) 430-4790.