Why we’re encouraged (and not alarmed) by the housing market

Is it time to buy a home again? Almost any adult in America has heard about the current housing crisis.🏘 Low inventory. Supply chain issues. Labor shortages. Bidding wars and homes being off the market before you even know they are available. Many people who were planning to purchase a home in 2021 held off because it just wasn’t worth the hassle. 

It’s been crazy – which you probably already know, because almost everyone has a friend in real estate who has been talking about it all year!😏

Experts disagree on what’s about to happen in the U.S. housing market. Some think it will remain competitive going into 2022 and slowly normalize🥳, while others think a crash like the one we saw in 2008 is just around the corner.😰 

Let’s take a look at which option is more likely.



The term “housing bubble” is getting thrown around quite a bit these days. But what exactly does the term mean?🤔

Housing bubble refers to a situation in which housing prices skyrocket due to high demand and spending influx. 

Because of high demand, supply has to increase to keep up. Homes get rapidly built and the market is flooded.

But, eventually, demand decreases – right when supply is at an all-time high.The result? A dramatic crash in prices.⬇️ When demand goes down, sellers have to drop their list prices in order to stay competitive. Just like a bubble eventually pops, supply outgrows demand and eventually crashes the market.😳

We saw a housing bubble in 2007. Demand went up because people were buying homes at historically high rates. Buyers were able to purchase homes with 100% government financing and no pre-qualification.😳🆘 They could also buy multiple homes with no intent to occupy, which resulted in multiple investment property purchases on the government’s dime. Loan structures also included adjustable-rate mortgages (ARM’s), which provided a low interest rate at the beginning of the loan, but allowed for an unregulated, rising rate over the life of the loan.👎🏻

In those conditions, lenders could easily take advantage of a buyer. They could impose a much higher interest rate down the road regardless of the borrower’s financial situation. While sketchy loans fueled the crisis, the primary cause was demand from Wall Street investors for mortgages regardless of quality. This ultimately led to a reckless surplus of unchecked mortgage lending🏦, which resulted in a devastating market crash.



Many voices today are using the word “housing bubble” to describe the current housing climate. This has many people concerned that we could see another crash in the near future. But there is a huge difference between the causes of the 2008 supply and demand imbalance and the one we are seeing today.

Instead of demand being caused by questionable lending, demand has been catalyzed primarily by the pandemic. COVID-19🦠 brought on record-low interest rates, work-from-home-opportunities, and reluctant sellers. The increased demand quickly took out most of the existing inventory and has led to one of the craziest seller’s markets the U.S. has seen.

Bidding wars and buyers bending over backwards to convince a seller to choose their offer has dominated 2021. But even though the housing market is in crisis, it is very unlikely that we are looking at another crash.



A more realistic perspective is that the housing market will remain somewhat competitive going into 2022 and begin to normalize naturally. Why? Construction labor👷🏻 is hard to find and materials are expensive or unavailable, which means supply is being restrained. Supply just is not going to skyrocket the way that it did in 2008 because of these factors. 

Also, it is reasonable to believe that demand will not plummet, but rather reach an equilibrium. For many, personal incomes have increased this year, and as their income rises, so does their buying power.💰 People still have the desire for homeownership, want to build equity, and as the housing market cools, people are going to start looking again. 

Click here for more information on why we are not in a housing bubble.

This is why it’s the perfect time to take steps to secure financing. If you held off purchasing a home in 2021, now is the time to start thinking about your dream of homeownership again.🏡 The supply and demand issues will take some time to balance out, but as soon as they do, it will be the best time to buy before interest rates go back up. Our expert Loan Officers at Legacy Mutual are ready to position you for a timely and confident home purchase as we head into 2022.🎊


P.S. Have you seen The Big Short? Check out this award-winning film based on true events of the mid 2000’s market crash. You’ll see why choosing a reputable lender is so important!