Home prices are rising three to four times faster than wages while credit conditions are loosening, says Lawrence Yun, chief economist for the National Association of REALTORS®. However, you don't need to be wary of a housing bubble on the horizon. Here's why:
"Even though the credit conditions appear to be easing somewhat, the move is from overly stringent conditions to not-so-overly-stringent conditions," Yun writes. "It is a far-fetched view to imply the current mortgage approval process in any way resembles the loosey-goosey, easy subprime mortgage access conditions of a decade ago."
Indeed, mortgage credit scores are nowhere near where they were during the housing bubble. Today, scores are at about 740 to 750 compared to 710 to 720 during the housing crisis, according to Fannie Mae data.
And even though housing prices are rising above wages, our low mortgage rates have been a silver lining.
Yun says you can squash those bubble fears by just looking at the housing supply. Existing-home sales and new-home sales combined were at 8.4 million back then. In 2015, combined home sales were 5.76 million — about one-third lower, Yun notes. It's mainly the limited supply of homes that's behind the latest home price increases, not the chaotic spending of money that buyers can't pay back.
Windermere's Chief Economist Matthew Gardner has been talking about this extensively over the last few months, especially as it relates to our own Seattle real estate market.
You can view the full article for more information from Realtor Magazine Online.
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