[caption id="attachment_3607" align="aligncenter" width="700"]Photo by Mugley Photo by Mugley[/caption] Home prices are booming, and demand is outpacing supply. A pattern that is similar to what happened between 2003 and 2005.  According to  the National Association of REALTORS® this March, existing home sales have surged nine percent year after year. Not only that, but home prices were up eight percent last year. This significant surge is leaving experts fearful of another housing bubble in the making. The market is showing promise, but is this positive trend good for us? Or is it leading us to trouble?®'s chief economist, Jonathan Smoke, says that "the data on supply versus price appreciation looked very similar to what we are seeing now," a trend that many are keep a close watch. On the other hand, Smoke believes there are key differences in our current market and what happened between 2003 and 2005. Stronger Foundation for Rapid Growth Yes, home prices have risen at a rapid pace over the last few months, which is something that experts are expecting to happen after the recession. It's a positive sign that we're bouncing back. The difference between the inflation of  home prices  then  and now is that current home prices are  expected to stick.  Something that didn't happen during the recession. What we witnessed from 2002 to 2005 was median prices rising 10 percent on a compounded annual basis – which had "no justification of a bounce from a prior decline," according to Smoke. The housing bubble grew  exponentially at a rate carried by the mortgage industry.  When home prices surged pre-recession, there was no justification for it. This time around, there is, as we are in recovery mode from the severe price declines. Stronger Lending Standards and Policies Another indicator that we are not heading towards another housing bubble is a major one: mortgage finance.  During 2000-2006, we witnessed an overly-optimistic outlook on the real estate market.  Home prices kept rising and rising at a time when the mortgage industry were very lax on their lending standards.  The result? New homeowners couldn't keep up with their mortgages and the bubble burst. Mortgage lenders are simply not financing loans so carelessly anymore. Yes, it is much more difficult to obtain a mortgage loan nowadays than ever before in recent decades, especially for millennials. However, tight  restrictions are put in place in hopes of a safer, more responsible home financing. More awareness of what's at stake The recession marked a time of misguided confidence in the real estate market. Unfortunately, many home buyers were led to believe  that purchasing  their dream home was a dream easily obtained. Nowadays, Americans are approaching the path towards home ownership with much more patience, knowledge, and hesitation. In other words, a healthier sense of buyer confidence than what we say pre-recession. Unfortunately it took a massive housing bubble to explode for us to learn the lesson of  responsible home purchasing. Potential home buyers, buyers and sellers are more aware of what's at stake. Like we said before, experts are keeping a close watch on the real estate market. Higher  demand and prices are great for our economy, but make no mistake that it will come with the expectation of responsible home lending practices and a healthier sense of buyer confidence. Read full article  via  Home Prices Are Climbing Faster, but This Is No Bubble.


Jim DeRentis
Sales Associate

Contact Me

  • Providence Office 140 Wickenden Street Providence RI 02903
Email me

We use cookies to improve your user experience. By continuing to visit our site, you agree to our use of cookies. Learn More