Published August 16, 2021
Is It a Bubble?
I got teased for going full economics geek filibuster with a client who asked when today's real estate bubble would pop... so here are my challenge 3 paragraphs to answer the question...
Past - the 2007 bubble was largely caused by overly relaxed lending guidelines which lead to massive speculation by investors, builders, and everyday people who took too many risks building, buying, and investing beyond their means, and having banking partners who helped them do it. When the market cooled and the loans when bad, we had a massive oversupply and prices dropped, builders went out of business and banks became much more conservative both due to good business practices and regulation.
Present - for the past 13 years throughout the nation, and regionally, we have not kept with or exceeded the 50-year average pace of building homes. This undersupply of homes has created a large imbalance in supply and demand which has driven up prices over the past 10 years.
Future - until we make up for the deficit in housing units not built, people stop moving to our region, and/or we see instability with employment or wage growth, we're going to see housing prices continue to rise due to simple supply-demand economics. Bottom line... if you are planning to stay put for at least 5 years in the region, you're better off buying today than waiting to see if the non-existent bubble will pop because when it doesn't, housing will simply be more expensive.
TLDR: It's not a bubble. It is an under-supplied market that has been going on for more than a decade and looks to continue on for the coming years.
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