Housing Prices and Homebuilder Stocks back at Pre-Bubble Highs
Housing Prices and Homebuilder Stocks back at Pre-Bubble Highs The housing market is one of the most important economic signs of a strong and healthy economy. Since 2008, the housing market has essentially been reeling from the pull back that took place in the market after the housing bubble crashed. However, now after a few years home buying and home building is back to the levels before the real estate crash. Not only does the stock market continue to rise, but the real estate market is seeing prices appreciate as fast as those before the crash. Although this is a good thing overall for the economy, there are some aspects that warrant caution from those that are watching from the outside.
Home Building
One of the biggest effects of the housing crisis was the huge amount of home inventory that was on the market at the time. Due to the nature of the crash, there were millions of people that had homes foreclosed on when they could not pay their bills every month. As the economy continued to improve, these millions of homes needed to be cleared out of the inventory on the market before anything could move forward. Looking forward several years after the crash, it appears that the old inventory of homes is finally starting to burn up and people are wanting to build homes again. Although this is a good thing, whenever there is a big build up in the economy caution is usually a good thing to heed.
Home Buying
As the stock market and stocks overall have continued to rise, so have housing prices as the inventory starts to shrink. For the first time in years, there is now less than 5 months of supply on the market for homes. As the inventory of homes continues to shrink, home prices will continue to creep up as home buyers come on to the market. Home buying is increasing at a pace that has not been seen in a while in the real estate market, and there needs to be caution in this area for several reasons. First of all, one of the main drivers of the last housing crash was the fact that people were quickly buying homes that they could not afford to live in. Whenever the real estate market sees demand like it is seeing now, it is always good to step back and assess whether that demand is actually market driven or not.