So.. it’s a bubble, right?
Considering all of the market jumps this year, the still-recent economic crash and year-over-year price bumps in the double digits and its easy to start the alarm bells. The first question that comes to mind is.. so, are we in a bubble?
Actually, no. Not at all, according to Lawrence Yun (chief economist for the National Association of Realtors). A ‘bubble’ is created when prices are inflated artificially and over-leveraged financially (ie not well secured with equity). Given that our current situation shows prices increasing on the backs of a majority of cash deals or equity-heavy mortgages (ie a substantial amount down) there is no ‘bubble’ to burst.
The economic factors that are driving the rapid increase in price are a function of demand and supply and nothing is happening to adjust that imbalance. Inventory at the low end of the market is not increasing and without a significant change, there is not likely to be a shift in new construction of attached dwellings (other than ‘luxury’ condos in a higher price point) at a rate that would address the problem.
Its all relatively good news for our industry but a big pain point for our many First Time Homebuyers and our senior clients who frankly don’t want to deal with a big mortgage in their golden years.
…Now if I could just find a place to start that tiny home community…