Money was lost, houses were repossessed, and society was holding its breath waiting for another brick to fall from the stack.
Now, even after a slow and steady recovery, pundits, the papers, and neighbors are echoing warnings of impending doom. With recent improvement of the housing market and a disquieting transition within the nation’s government, alarming theories abound.So, are we trapped inside another housing market bubble?
The Myth: Yes, housing prices are rising and the market will burst, accelerating the fall of a recovering economy!
The Truth: Not so fast.
First, following the crash of 2008, regulations were enacted resulting in a vigorous policy overhaul. These new policies enforced responsible and prudent practices amongst the housing industry giants and the US Government — protecting consumers and expanding supervision.
Some of these acts include:
The Dodd Frank Wall Street Reform and
Consumer Protection Act:
Ending bailouts and ensuring taxpayers’ protection from having to pay for Wall Street’s recklessness.
Speaking of recklessness, the government responded with:
The Federal Housing Finance Regulatory Reform Act of 2008: Among other consumer protections including new disclosures requirements, it establishes regulations on Government Sponsored Enterprises including Federal Home Loan Banks. With these regulations in place, risky loans aren’t irresponsibly handed out.
Another reason we aren’t in a bubble are millennials.
Yes, they’ve been at the end of many-a-pointing finger, but for once we should be thanking them for their hesitance to spend. They are currently the largest generation of our population, so their actions have the biggest impact. Due to a variety of factors, millennials are settling down much later than previous generations. This means they’re not purchasing homes in droves yet, keeping the housing demand in check for just a little while longer.
Lastly, those who are buying homes, are taking advantage of lower interest rates. Before the crash, they were hovering around 6% at a 30-year fixed rate. This was taking a significantly larger chunk out of home buyers’ budgets leaving the possibility for failure to keep the home down the line.
Now, rates are around 3%, giving a little more flexibility to afford a home and a better chance at keeping it.
In the current transition of the government, we’re left undecided about a lot of things. But, there’s one thing we can hope for as we move into a new generation of politics and the economy. With hearty reforms in the housing industry, a current steady market with low interest rates, and a generation reluctant to settle down right away, we’re not in a bubble, we’re in what Forbes calls “a growth trend.”