A housing bubble is defined as the run up of prices in housing caused by speculation and demand. According to David Haggith, more new permits for homes to be built have been issued in 2017 than the previous year. He has attributed it to lax credit standards that allow for potential buyers to afford new houses.
But what does this all mean and how does this affect you as a homeowner?
The Housing Bubble Explained
When there is an increase in demand for something, in this case, homes, speculators come in to further drive that demand higher. The problem is that the product they are demanding for usually takes time to create or build. Sometimes, the supply will catch up with the demand. Sometimes, it doesn’t. The decrease or stagnation of the demand will often cause huge drops in prices because now, there is a lot in supply. Think car commercials where they say “We have too much in our inventory.”
That is the bubble bursting.
Is There a Bubble That’ll Burst?
Darius Bozorgi, Veros CEO, answered the question with first, a definite “no.” He said in an interview that what we are feeling is “steady growth.” The housing economy has been growing steadily in comparison to 2007 and 2008 when the backlash of the recession was last felt.
Haggith stresses that even if it is not being felt in the US, countries like Canada and Australia are already feeling the effects of the burst. For instance, Australia is already asking for zero percent down payments. Sydney is seen as the fourth-most likely city in the world to experience the implosion of a housing bubble.
What Should You Do?
If you are looking to buy or build a home, consider spending less than what you can afford. Whether it is recession-like or not, it is always wise to live within your means. Ask around, like the Perry Homes Southern Utah community, to get a better feel of what will be right for you and your family.