Market Updates

2021 Housing Bubble: Fact or Fiction?

Let’s talk about the 2021 housing bubble! You know, the impending crisis that all the real estate gurus are ranting and raving about? It’s time to gird yer loins! Or maybe not.

In this article, I’ll be breaking down some of the red flags we’re seeing in the real estate industry. Additionally, we’ll review what this means for the market as a whole. Finally, we’ll talk about what a housing bubble is (and is not), and whether I believe we’re in one.

Let’s learn!

2021 Housing Bubble: Fact or fiction? Let's talk about the idea that we're in a housing bubble, the market in general, and the signs that we're actually a-ok.

Red flags: Why is the 2021 housing bubble making headlines?

First thing’s first: what are the market indicators we’re all looking at?

Here’s a fun fact for you: the real estate industry is about 25% of the United States’ economy as a whole. There’s a lot of land in the United States, and a lot of people want to buy it. Some of them are individuals buying single-family residences. Others are investors, domestic or foreign, who want to own land for its appreciation (and income potential).

Each real estate transaction can lead to many, many thousands of dollars changing hands. Between inspectors, brokers, loan officers, title companies, county recorders, contract laborers, lawyers, and many, many other professionals, each transaction can mean upwards of $30,000 entering a local economy.

Crazy, right?

That means our industry gets watched. A lot.

If you want to predict an economic crash, the housing industry is a great thing to watch closely.

Current market indicators

At the moment, we’re in a sellers’ market.


Truth be told, we have no word for the market we’re in right now. Everything is so unprecedented at this point, “sellers’ market” doesn’t really do it justice. Even brokers with 20-year careers are at a loss right now.


A few factors:

  1. When everything shut down, everything shut down. The cost of lumber surged because production had to come to a halt.
  2. Foreclosures stopped happening. Evictions stopped happening.
  3. Senior citizens, who are net sellers are a group, refused to move into group living facilities or family members.
  4. Interest rates dropped to historic lows, which means that buyers want to buy. There’s a lot of demand to seize the opportunity for 2.75% financing for 30 years.
  5. Low interest rates also mean people are refinancing en masse and thus aren’t selling like normal.
  6. In general, new construction has been slowed since the Great Recession, so we were already seeing low inventory.
  7. In many markets in the center of the country, we’re seeing a mass migration of people from areas with higher costs of living. If you can work remotely, why pay California or New York prices?
  8. There are way too many Airbnbs and other short-term rentals in many areas with tourist attractions. Any house being used as a short-term rental is not being used to house families.
  9. Considering how volatile and precarious the stock market appears these days, wary investors are choosing to dump cash into real estate, mostly because its value isn’t likely to disappear overnight.

Is that enough reasons?

Bottom line, we don’t have inventory. This is happening at an unprecedented level in nearly every market nationwide, if not across the world.

This creates bidding wars for buyers and drives up prices.

That rapid increase in prices? It looks like a bubble. The great 2021 housing bubble, to be specific.

But here’s the thing…

All these indicators make sense

A bubble is an artificial inflation of value – an increase that doesn’t make sense.

An increase in price because of record-high demand and record-low supply is basic economics.

People want houses. We need houses. That need won’t go away overnight. Our population is still growing. Communal living is a relatively affordable option for millennials, but do we really want to have roommates until we’re dead?

Of course not.

Further, the supply won’t increase rapidly overnight.

All the above factors will change over time, but it’s going to take a while.

Even if all the panorama-related issues clear up immediately, there are many, many other factors driving the current sellers market outside of that.

2021 Housing Bubble: This isn’t 2008 again

The last housing bubble was driven by, in essence, shady practices. Mostly subprime mortgages and the warehousing of them (with make-believe credit ratings, at that).

At the time, basically anybody with a pulse could get a mortgage with very little documentation. That’s gone away now with many, many needed updates to lending laws and the oversight of the Consumer Financial Protection Bureau. Further, imaginary credit ratings aren’t being applied to securities (at least, not mortgage-backed securities. I honestly can’t speak to any other industry).

So you don’t have that imaginary, inflationary value. You also don’t have people in homes they can’t afford. Instead, we’re required to show quite a bit of documentation to prove people can afford their mortgages.

Stop thinking it’s another 2008. It’s not. We’re not entering another great recession. Not because of that, at least.

(I mean, economies will always go in cycles, so we will soon enough, but not because of this.)

Verdict: It’s fiction

Talking about the great 2021 housing bubble or housing crash makes for a great, clickable headline, but it’s simply not true.

First, nobody can honestly say they know when we’re in a bubble. That would require a crystal ball or some really strong drugs. We just can’t predict the economy at that scale.

Second, the data just doesn’t support it. If you look at an actual market analysis, either locally or nationally, the increase in prices, while unprecedented, seems to follow the change in supply and demand.

These factors will change, but not so rapidly as to send home values plummeting.

So what does the non-housing bubble mean for you?

It depends!

If you’re looking to sell and you have a place to go, now’s kind of an ideal time to do so. The limited inventory and increased competition absolutely means you can get incredible offers at this time.

If you’re looking to buy, I won’t lie: you’re looking at increased competition. That doesn’t mean it’s impossible to buy! It just means it’s a little more difficult right now.

The good news? A good Realtor can walk you through your options and how to write an offer that works in today’s market. Give us a call so we can help you achieve your goals!

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