Are We Headed for Another Housing Bubble?

Driven by the recent bond market activity, mortgage interest rates saw a sharp increase in the month of June. Some people fear that this is going to send the housing market into yet another bubble, much like we experienced last decade. However, the forecasts are not all grim.

In order for another bubble to happen, we would have to see a significant drop in the affordability of homes. As long as the national median-income household can afford the national median-priced home, we won’t be plagued with the same wave of risky credit ventures that brought about the economic downturn of the past decade. Though housing affordability was at a low point in June of 2006, forty-eight states currently enjoy an affordable housing market today.

With home prices as low as they are, we would have to see quite the substantial jump in rates in order to hurt their affordability. Meanwhile, the recent rise in mortgage rates can serve to slow the current pace of appreciation, which can actually help to prevent another bubble from forming.

Much of what ultimately happens will, of course, depend upon the unpredictable attitudes and expectations of the public, but there’s no reason to believe that we’re about to see another significant downturn anytime soon. With that in mind, keep your chin up and contact David Haley for all of your mortgage and home loan needs in the Lynnwood area.

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