As houses seem to be flying off the market in recent months, memories of the housing bubble of the early 2000s – and the subsequent crash – are vividly returning to many Americans. However, Michael Eisenga, former mayor of Columbus, WI, and successful business and real estate investor, notes key distinctions in the current housing market and the one America witnessed two decades ago.
First, Mr. Eisenga cites the high credit scores and hefty down payments that most home-buyers are offering. The home loans being offered to these eligible buyers are in exact opposition to what was seen during the housing bubble of the 2000s.
The stimulus checks and the reluctance to enter into an impossible amount of debt are two factors that were indeed not at play in the early 2000s. At that time, buyers took on immense debts to purchase their homes despite low credit scores.
While there has been an increase in potential homebuyers in the past few months, the “hot” market shouldn’t be attributed to this aspect. Instead, the perceived shortage is due to a combination of fewer homeowners selling their houses, an attempt to avoid contact during the COVID-19 pandemic, and less homebuilding over time after the housing bubble burst.
Mike Eisenga also explains the underlying factors that are triggering what seems to be a sudden boom in the market. He attributes them to one main thing: The millennial mindset.
As the largest demographic in the U.S. today, millennials are currently in their early twenties through early forties. For various reasons, Millennials tended to put off buying a home and are now deciding to invest.
Because a huge portion of millennials feared homebuying due to their experience with the financial crisis of 2007-2008, many decided to travel more frequently instead of settling down. Others chose to spend money on college instead of homes in their early twenties.
However, many millennials are now seeing this year as the perfect time to buy a home. The work-from-home lifestyle and the low-interest rates available at present have made buying a home a more reasonable investment for millennials in 2021.
Mr. Eisenga assures investors that America is not in a housing bubble… at least not yet. Of course, the hot market could continue to heat and expand into a bubble. But for right now, the market is simply growing for healthy reasons.
However, Eisenga says that it’s best to keep an eye out as America’s nearby and across-the-pond neighbors, Canada and the UK, are seeing a near-housing-bubble situation develop. The U.S. may follow in their footsteps in the nearest future.
About Michael Eisenga
Michael Eisenga is a successful commercial real estate investor with a banking and finance background and is the former mayor of the City of Columbus. As a President of both American Lending Solutions, a mortgage lending company he founded and operated from 2000 to 2018, and First American Properties, he has a track record of creating and operating successful businesses.