Housing bubble? I still think not …

This article was posted yesterday by the Texas Real Estate Research Center:

Same song, second verse: ‘Is there a housing market price bubble?’

Economist Dr. Luis Torres correctly points out: “The problem with bubbles is that they cannot be identified with any certainty or confidence. If they could be, they would never form in the first place.”

With that said, I have argued previously that, at least in the Austin metropolitan area, the rapid price appreciation in recent years has been driven by real growth in jobs and population, not by logically unsupportable mortgage lending practices and irrational investor speculation as we saw in the run-up to the last downturn in 2007. Dr. Torres notes that

“So far, 2006-07 housing bubble characteristics are not prevalent. Those are:

• loose lending standards,
• lax oversight, and
• exuberant speculation (investment motive).“

I can make the argument that much of the past six months has gotten irrational, with dozens of offers on new listings, often from prospective buyers who haven’t even seen the properties yet, and with sales prices far exceeding list prices. I can also argue that the market is showing some signs of pushing back — listings coming back on the market during termination option periods, price reductions that we didn’t see just a couple of months ago, and even an occasional sale below list price. Listing inventory has increased every month since March 2021 and in June was the highest it has been since November 2020. You should know, though, that June inventory was still less than half the number of listings on the market in July 2020, and only 26% as many listings as we had in August 2018.

We are not out of the woods by any means from a supply vs. demand prespective, but I’ll take progress as a good sign. I also agree with Dr. Torres that this extraordinary boom doesn’t look or feel like what we saw in 2007-2008.