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Notebook and Pen


Think we're in a Housing Price Bubble? Think Again...

Updated: Sep 26, 2023

I was talking with a friend about the housing market, and he mentioned to me how many first time homebuyers have now been priced out of the market. It's a common feeling I discuss all the time with my clients so I thought it would be worthwhile to share some perspective.

The above graph shows the annual median home price since 1990. The turquoise line represents the 4% annual appreciation that real estate has maintained over the longer term (Remember what I say, Real Estate is about Time IN the market, not TimING the Market).

At the peak of the housing market just before the Great Recession, home prices were 21% above the trend line, and we know what happened after that. from '09 to '20 prices were below the long term 4% trend line until '21. Now however, home prices are ONLY 7% above that long term trend. That is 1/3 the amount above the trend line as compared to '06, and when you factor in that we haven't BUILT enough homes to keep up with demand over the past decade, you realize that this is a completely different market than what caused the Great Recession!

Finally, when you factor in the median home sales price, at today's going interest rate, as a percentage of the average income, you will see that we are still in the long term affordability range. We just became used to HIGH affordability that was caused by artificially low rates from '08 to '22.

I can go on and on about this, so don't hesitate to reach out if you have any questions, and we'll have a conversation. Remember, we help GOOD people to WIN at Real Estate!


Content by Vidona Residential Columbia Realtors

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