Are We In a Bubble?

Real Estate Bubble

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…

– Dee

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About Dee Bundy

Dee is an avid horsewoman, dedicated Realtor and recovering geek. She brings the snark to this site but is also passionate about sharing everything there is to love about Northern Colorado and the many benefits of living here.