Housing Bubble Watch
We continue our ongoing monitoring of the housing market.
As I write this in late January, speculating into the future when this will post, there are a number of uneasy factors. The DJIA has seen a decline of nearly 7% over the last month, tensions with Russia have increased, and the housing market has seen a "normal" winter with a slowing in price appreciation but historically low inventory.
Currently the market has seen a large withdrawal in home equity, similar to that of pre-2008. However, lending standards are better than that same period, however I see greater risk tolerance on the increase. Simultaneously, large investors are purchasing homes in the greater Richmond Metro area for inclusion in rental portfolios. While this isn't the "speculation" that is normally seen in a bubble formation, it is a speculation of a kind. Buying homes at historically high prices under the assumption that rental rates will continue to increase despite a house building boom... is speculation.
On my 7 point scale, I would say that we are at approximately 5.5. Higher than past analysis due to increased market speculation, and higher risk tolerance seen among investors, but not fully in the full bubble stage (7 is the burst). If inventory remains as low as it has for the past two years, and the market manages to hold to only a correction, we will likely see a moderate 2022 (3-6% growth on average), but there are many factors that could make this post seem silly by the time it drops.