MBS HIGHWAY HITS HOUSING BUBBLE AGAIN
Barry Habib, Founder of the MBS Highway, hates it when the media spreads irrational fear about a housing bubble. He also shares marketing materials that subscribers to his content are allowed to share without attribution to him, but that is anathema to me.
Below is a script he recently wrote for loan officers to use in social media videos, and I liked it so much that I am stealing it for a blog (with attribution 😊).
As an aside, I beat the “no housing bubble” dead horse every few months because it continues to come back to life over and over, as housing continues to appreciate.
HOME PRICES 41% HIGHER THAN IN 2006
“Home prices have risen 41% since 2006. This has prompted another round of media fearmongering that a housing bubble is imminent.”
As you know, the media has been talking about a housing bubble for the past several years, only to see home prices continue to be well supported.
Comparing today’s housing market to the market in 2006 requires us to understand some key differences to help us see the full picture. Let’s break that down.
MAJORITY BUYS HOMES BASED ON MONTHLY PAYMENT
The majority of individuals who buy homes do so based upon monthly payment. Therefore, we must consider differences in mortgage interest rates, as well as differences in household income between the market in 2006 and today.
Mortgage rates in 2006 ran about 3% higher than interest rates that are available today. This helps make the monthly payment today much lower, even in some cases where the amount borrowed is higher.
Meanwhile, average hourly earnings have increased by 55% from 2006 to today, according to the Bureau of Labor Statistics.
Because of the rise in income, as well as the drop in interest rates, the cost to purchase a home today appears to be significantly more affordable than it was in 2006.
Additionally, today’s appreciation is due to record low home inventory levels and strong demographic demand, which wasn’t the case in 2006.
Don’t let the media scare you out of all the wonderful benefits of homeownership.”
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