Historically high home prices have stirred talks of a housing “bubble.” But data could suggest the U.S. is in a housing boom…
Over the past two years, home prices have surged, pricing out many would-be buyers from purchasing existing homes.
This has resulted in panic among some investors, as many argue that today’s market is eerily similar to the housing bubble we saw in 2006.
However, the situation may not be as dire as some headlines may suggest. Unlike last time, mortgage rates are significantly more difficult to qualify for.
Bloomberg reported that in 2006, mortgage credit availability jumped to almost 870 back in June 2006. That’s a drastic difference from October 2021’s mortgage credit availability of 125.7 – a number that has largely remained unchanged over the course of the year.
This is due to lenders raising lending standards beyond the guidelines put forth by the Dodd-Frank Act of 2021, which the news service reports was passed to avoid another housing-fueled financial crisis.
As a result, loans are comparatively smaller than they were back then. They’re also in proportion to housing values and borrowers’ incomes.
Beyond that, borrowers’ average credit ratings are higher as well. And many are unable to qualify for homeownership without full documentation proving their creditworthiness.
Still, elevated prices have some watching the market certain that it will inevitably come crashing down. But even this may be more of a fear than a market reality.
Yes, the National Association of Realtors’ recent report showed the median price of an existing single-family home in the U.S. increased by 16% from the year prior.
However, price gains have also slowed. In the second quarter, the rate of growth was 23%. Meanwhile, roughly 78% of 183 metropolitan areas reported double-digit increases. That’s a substantial deceleration from the previous period’s 94%.
And even though high prices are pushing some prospective buyers away, the data suggests the largest increases are now behind us – signaling the market could continue surging.
We saw this in October’s existing and pending home sales reports. It was also emphasized by positive data for housing starts and building permits.
Late last month, the National Association of Realtors (“NAR”) showed that existing home sales rose by 7% in September at an annualized rate of 6.29 million due to buyers taking advantage of low mortgage rates.
The same organization highlighted that while pending home sales declined by 2.3% in September, they remain near historic highs as well.
Meanwhile, housing starts and building permits also fell. But even those remained near multi-year highs. According to the Census Bureau, housing starts were recorded at a rate of 1.55 million in September while building permits were measured at 1.58 million.
So, all of these factors combined indicate that housing demand is not only currently strong, but will remain that way for some time to come.
This is doubly true when you look at building permits for new homes – which also remain high. That’s because it suggests homebuilders anticipate strong demand for future orders.
In turn, we could expect the SPDR S&P Homebuilders Fund (XHB) to rise moving forward. And companies such as NVR (NVR), Lennar (LEN), and D.R. Horton (DH) could benefit as well.
Can we be honest for a second?
We both know the market can’t just keep going up like this…
Something’s got to give – and soon…
Maybe you’ve even been secretly preparing for a crash.
But let me ask you a question…
How can you prepare for something when you don’t know what’s going to cause it?
Most investors think the Delta variant, or a slowing economy is what’s going to finally put an end to this bull market…
They’re all wrong.
And because they’re clueless as to the real reason behind the next crash, they’re completely unprepared for what’s coming.
I don’t want you to be like the oblivious masses…
In fact, I want you to be able to turn the next crash into a massive wealth-building opportunity…
And that all starts by first understanding the truth about the next market crash.
I urge you to watch it as soon as you can…
Because the overwhelming evidence I’ve gathered points toward the next crash happening as soon as mid-December…