Navigation Menu+

Are we in a bubble?

Are we in a bubble?

In 2004, I was just getting into real estate. Those were days where prices were rising and things were moving quickly. And then, they weren’t. The real estate bubble burst. In 2006 we started to see inventory climb, and then in 2007 through 2012 we saw prices come down and down and down. In hindsight, everyone looks around at the warning signs and asks the question…. could we have seen this coming? If we had, would we do things differently?

Now, in 2018, we are experiencing an even tighter inventory level than we did in 2004. While everyone is excited to see the value of their home going up, we are also experiencing some housing market PTSD. Is this just like before where it was all a set up for losing thousands of dollars? Is this another real estate bubble, waiting to burst?

I recently went to a conference where I met the NAR Chief Economist and I was able to ask him this very question. He believes that the answer to this question is no, because what is causing our prices to go up is caused by very different things than what caused it the last time. Last time prices were artificially inflated by low lending standards. This time prices are going up because of the classic situation of supply and demand. During the downturn the construction industry slowed down the rate of building, causing some people to leave the industry. Now the construction rates are not keeping up with population growth. One of the major things holding our economy back is the lack of construction workers. This is especially true in the lower price points, and this is why we are seeing the most competitive markets in the first time home buyer price points.

Although economies go through cycles and the boom we are experiencing will not last forever, every economist that I’ve heard has said that they expect us to experience housing gains foryears to come.