What Is A Housing Bubble & Should I Be Worried?

What Is A Housing Bubble & Should I Be Worried?

In the real estate industry both professionally and socially there is a ton of jargon, but the one term that is thrown around the most I think is referenced as the “housing bubble”. Is the bubble getting bigger? Is the bubble about to burst? What will happen when it does? The media uses this term often to stir up the conversation in the news as well as when talking about the markets and economy, because when people hear the term they perk up, in fear of the bubble bursting or becoming fragile.

 

But what are they actually talking about… What is a housing bubble?

Bubbles, in general, are used as a term in a few industries like real estate, financials, investing etc. in relation to things that effect the market that build interest around a certain topic like the housing market. They call it a bubble because the talk around real estate is blowing up the conversation and interest, sort of like if you were to blow up a balloon. As more people talk the balloon inflates, increasing in size – when they stop talking about it or talk less about it the balloon deflates. The inflation and deflation of the balloon in this example would also align with the act of more sales and real estate activity as the bubble grows and less sales and activity as it deflates – This also might be referred to as “the bubble bursting” as it sinks back down to the usual level of attention it received before the bubble’s rise.

Historically we don’t tend to see many bubbles the housing marketing, though as interest rates have plummeted and demand for homes in the Barrie and surrounding area is increasing by the day, while the supply of homes for sale is limited this might lead us into a rising housing bubble. And, as what comes up must also go down, the bubble will inevitably burst, and sink back down to its average level. The question of when that will happen, however, is the real unknown in this equation.

Should I be worried about the housing bubble & it bursting?

As a homeowner having invested large amounts in our home throughout the years or even in recent months, if you’ve purchased a new home having taken advantage of today’s rock-bottom interest rates, you might wonder how the housing bubble bursting could impact you directly. If we take a look at the bigger picture over the last 25 years there have been many ups and downs when it comes to housing bubbles, however, the impact on the average homeowner has been minimal. Keeping in mind that though your current mortgage term might be 5 years in length, there could be a few ups and downs in the real estate market in terms of interest rates and home prices rising and in turn falling during that period. At the moment the low-interest rates are advantageous to first-time homebuyers and real estate investors as well as those looking to consolidate their debt with the equity built up within their mortgage. However, higher than average house prices and battles to purchase new homes are increasing every day as well, which gives weight to the question, of whether or not the home you purchase today will be worth that same valuation five or ten years down the road. So though there is not as much to worry about, there is something to be cautious of. When buying a home today, It’s important to level-headedly agree to a purchase price that you can afford now and in the future, while also keeping in mind that the demand in the market might be over-inflating the price of the home at the time of purchase. If the tides were to turn you’ll want to make sure you won’t end up treading water on the deep side of the pond.

If you have any questions about the current trends in the Barrie and surrounding area real estate market and how your mortgage might be affected specifically, feel free to give me a call at 705-315-0516. I’m always happy to answer your questions and help you whenever possible.

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