Are We In Bubble Territory?
Home values continue to rise across Dallas/Ft. Worth, as well as the nation. And home buyers in Keller, Southlake, Colleyville and surrounding areas are starting to ask if we're entering another housing bubble. Fair question. It's certainly one you'd want to know the answer to if you're considering plunging into the housing market. Zillow just reported that:
“National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.”
So if you buy a home today, you may well be paying the highest price the home has sold for... But are we in bubble territory? The Zillow comment is correct; the Dallas/Fort Worth area has passed previous peak home values. But does reaching (and even surpassing) prices of a decade ago mean we're on the verge of a bubble? Check out this graph from the National Association of Realtors (NAR) showing median home prices.
the chart above shows what we all know. Home prices rose during the early 2000's, fell during the crash, and have been back on the climb again since 2013.
However, let’s assume there was no housing bubble or crash after 2008, and that home prices appreciated at normal historic levels (3.6% per year nationally) over the last ten years...
Here is a graph comparing actual price appreciation (tan bars) with what prices would have been with normal appreciation (blue bars).
Comparing the National Association of Realtors (NAR) chart showing actual median home prices along side the normal historic price appreciation, we can see home values would essentially be where they are right now. So rather than a bubble, it seems the housing market has really just bounced back to where it should be.
Housing price bubble? Probably not. The real question for a would-be home buyer shouldn't be "is there a bubble?". Rather, the question should be, "how can I take advantage of real estate as an investment for my financial future, as well as my family's quality of life?".