Competition in today’s housing market has put many buyers in a bidding war for the home of their dreams. “You can barely get a sign in the ground, and everyone is jumping on it,” says Kim Curtis, chairperson of the Greater Milwaukee Association of REALTORS®. “But make no mistake, this is not a housing bubble.”
For some, the hotter-than-hot real estate market is stoking thoughts of the housing bubble that burst in 2008. Curtis, who is a broker with Shorewest Realtors® and loan officer with Wisconsin Mortgage Corp., says fear not. “The state of today’s housing market is driven by the economics of supply and demand. There simply aren’t enough homes for all of our buyers, and that is not changing anytime soon.”
The dynamics behind the nation’s 2008 housing situation underscore the confidence that Curtis and many other Realtors have in today’s real estate market. Courtney Stefaniak from Stefaniak Group LLC points out the distinct differences.
“The 2008 crash was fueled by subprime lending, interest-only loans and the like. Today’s lending requirements are much stricter, which puts the real estate market on firm ground.” She continues, “Another contrast is the fact that in 2008 the market ground to a halt. That’s quite different from our market today because we still have pent-up purchasing demand for homes.”
What Happened Last Time Is Not Happening Now
To explain the housing crash, easy money from lenders led to a home buying frenzy in the early 2000’s. When the same people without home equity couldn’t pay their mortgages, foreclosure was inevitable. This resulted in a glut of homes for sale in 2007 and 2008. There was no surplus of buyers to absorb the homes and lenders were left holding the bag for loans gone under.
Today’s home buyers are well vetted for solvency, most sellers have a good deal of equity built up in their homes and people are looking for a place to “nest” – thanks to the pandemic. Stefaniak explains this contributes to stability. “Some people are staying put and fixing up or adding onto their homes. Others are looking for a bigger footprint. These are the buyers who need room for a home office, a place for the kids to play or an extra bedroom for a growing family.”
Other Factors Fueling Housing Demand
Since inflation has hit the rental market, many first-time home buyers are finding a mortgage may be less than what they would pay for apartment rent. Newly built homes would certainly help ease demand but supply chain issues have added a layer of uncertainty and have somewhat curtailed new construction.
Finally, rising interest rates seem to be having little effect on activity in the local real estate market. Curtis sees buyers continuing to move forward. “A higher interest rate will make affordability an issue but, instead of walking away, home buyers are changing their expectations. They are looking at something a little smaller or in a different neighborhood.”
Still, there are hold-outs waiting for the market to deflate before reentering the buying field. Curtis is seeing this happen and offers a straightforward observation. “Is the economy challenging? Yes. Is there inflation? Yes. Does that mean you should wait to buy a home hoping to catch a downward trend? No. We are not experiencing a housing bubble. We are experiencing a supply and demand issue. And, if there is no bubble, then there is nothing to burst or crash.”
What is a Realtor?
The difference between an agent and a Realtor is significant. A Realtor is a member of the National Association of REALTORS, is committed to a Code of Ethics and has the expertise to find the right home for their clients. Look for the “R” to determine if an agent is a Realtor.
The Greater Milwaukee Association of REALTORS is a 5,000-member strong professional organization dedicated to providing information, services and products to help Realtors help their clients buy and sell real estate. Visit gmar.com for more information.