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2013-11-06 17:35:29
No Housing Bubble Expected

The nation’s real estate market is on the rebound and, in most areas, home sales and prices are climbing. And now, some people are talking about the possibility of another housing ‘bubble.’ But some housing experts and economists who’ve been watching the market for prices rising ‘too far, too fast’ say they just aren’t seeing it. In fact, many indicators don’t support the idea of another housing bubble at all.

Real estate data provider CoreLogic considers the formation of another housing bubble to be ‘unlikely.’ The company instead predicts home prices will increase by 3.9 percent annually over the next five years. Senior economist Michelle Meyer of Bank of America Merrill Lynch also believes home buyers don’t need to worry about a bubble, based on these four key reasons:

  1. Valuation – Meyer says home prices are undervalued.
  2. Expectations – Another feature of the housing bubble was the 'expectation' that home prices would only go higher, this seems to be more moderate this time around.
  3. Investor speculation – While there is investor speculation in the market, there isn't an overwhelming presence of 'less sophisticated investors' with 'irrational expectations.'
  4. Leverage – Credit conditions are tight. '90% of lending is backed by the government, and average FICO scores for new purchase loans remain exceptionally high.'

Jed Kolko, chief economist for Trulia, one of the most popular real estate web sites, also believes there is no evidence of a bubble. For there to be a bubble, Kolko says home prices have to rise beyond their fundamental values. And he says that simply isn’t happening. Many homes remain below their bubble-era valuations. Real estate is, of course, local, but in much of the U.S., low prices and low lending rates make it a great time to buy a home!

 

Nick Coleman, Park City Realtor

By Nick Coleman
Call 435-640-7781 or email [email protected] 
to find your Dream Park City Home.

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