This is the biggest question potential homebuyers are facing right now. But the answer is both yes and no. "Yes" in the sense that home prices have noticeably spiked. "No" in the sense that the housing market is definitely not in the same shape it was in before the 2008 crash. This means that we likely won’t see a big burst as we did back in 2008, according to Mike Schenk Deputy Chief Advocacy Officer for Policy Analysis and Chief Economist at the Credit Union National Association (CUNA).
“We’re definitely seeing prices increase rapidly in some markets, and the increase is unsustainable,” said Schenk. “However, we shouldn’t expect a bubble that’s going to pop, but adjustments will likely be made over time. ”
Schenk explained that while we're not in a bubble comparable to 2008, there are some concrete reasons why home prices are rising so quickly. Some factors that he attributes to what he calls a current speculative housing bubble include:
Demand - The demand for housing has increased, but there is not enough supply to meet this need. Thus, prices are driven up.
Labor shortage - There is also a shortage of workers who are qualified to build homes, since some of the people employed in these industries retired early in the wake of the pandemic.
Higher cost of materials - It’s no secret that the cost of raw materials needed to build homes has increased as well over the past year.
According to the Federal Reserve, American household debt is at an all-time low.
“When the pandemic hit, disposable income went up due to unemployment benefits and the stimulus package,” said Schenk. “For more than 10 years, debts outstanding as a percentage of take-home pay has been declining. This means that consumers (on average) are in a much better place financially to buy and keep their homes.”
According to NBER.org, most households used 30% of their stimulus checks to pay down debt, and another 30% went to savings.
According to Schenk, we could be looking at all this data through a lens of an improving economy. Unemployment rates are falling, and more and more people are getting back to work. Still, as an experienced economist, he warned that people should be cautious with their money since we’re still in an unpredictable pandemic.