In an article released by the Daily Journal of Commerce, Matthew Gardner describes his confidence that we are not currently in a housing bubble, ten years after Alan Greenspan first said he had no concerns regarding the housing market just before the recession hit.
Where does Gardner's confidence come from? He breaks down his top four reasons why there is no "national bubble on the horizon":
- The flippers have left the building - "Data supplied by RealtyTrac suggests that the percentage of homes that were bought with the intent to 'flip' has dropped from a peak of 6.7 percent at the beginning of 2014 to 4 percent today . . . signifying a more normalized market."
- Lending standards remain very stringent - "there are several components of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provide substantial safeguards when it comes to irresponsible lending practices, such as requiring lenders - through the qualified mortgage rule - to ensure a borrower's ability to repay."
- Home prices are up, but not to pre-bubble levels - at the national level, the bursting of the housing bubble led to a 27 percent drop in the index. The index has risen but is still 9 percent below the prior peak."
- Interest rates are (eventually) going to rise and cool the market - "the growth in employment, and the subsequent drop in the unemployment rate, will lead to wage growth, and increasing incomes will take some of the sting out of any rate increase."