Clients that are concerned about the increasing price of residential real estate, often ask us if we are in the midst of a market bubble. Although the increase in home prices is exceeding the historical average, there is no indication that we are in an artificially inflated market that is on the verge of collapsing. If you want to sound really smart around your friends, or you're an economics nerd like us, we think you will really enjoy the attached article. This article will walk you through six different real estate metrics that show the 2021 real estate market is nothing like the early 2000's bubble market leading up to the crash. Remember the blockbuster movie The Big Short? Financial experts predicted and took advantage of the housing bubble, heavily brought on and perpetuated by the high-risk loans that were being given out on demand. Yeah, ask anyone who has recently gotten a loan to purchase a house how easy the process is. The answer, mortgage standards are nothing like they were back during the bubble market! (Which is a good thing!) Other notable takeaways, year over year home appreciation graphs show prices are not soaring out of control; year over year graphs showing existing months of housing inventory prove there is certainly not a surplus of homes; and due to lower interest rates and rising incomes, homes are more affordable now than they were at the height of the bubble. 

Posted by Hayden Wald on


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Hayden, this is great info!
I've always believed that an effective way to gauge the level of speculation in a particular housing market was to compare the cost to own versus the cost to rent. I remember back in 2006, the speculation in beach properties had propelled prices so high, that rental income from vacationers was nowhere close to covering the cost of paying the mortgage, taxes and insurance. Buyers weren't buying to hold. Instead, they speculating on the possibility of "flipping" the property at a higher price.
According to a recent report from, the average cost to own a home is only about $80 more than the average cost to rent a home in the Birmingham area. This would appear to confirm that while housing prices are increasing, the increases are based on actual supply and demand between available houses and buyers who intend to occupy the homes.

Posted by Mike Wald on Saturday, April 17th, 2021 at 4:56pm

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