New Housing Bubble?

Maybe… But Definitely More Manageable

The sharp decline in inventory has dramatically increased real estate prices in some parts of the nation. With fewer properties for sale, bidding wars have erupted and as we ease well into summer, the market has seen little relief, as housing prices persist in trending upward.

With smart real estate investment strategies and systems in place, many real estate investment professionals are doing just fine despite these apparent obstacles; however, along with this trend comes a new speculation has some economists feeling worried lately; word on the street is that some analysts fear that we may see another housing bubble burst unless the high housing prices are matched with new construction.

Lawrence Yun, chief economists for the National Association of Realtors (NAR) suggested recently that a 50% increase in new home construction might be enough to reduce the risk of another housing crises. In a statement, Yun said, “the home price growth is too fast and only additional supply from new home building can moderate future price growth.”

In recent months, home prices have reached a high that has not been witnessed since the 3^rd quarter of 2008 when the housing bubble burst. In fact, the month of May in 2013 showed a 15% increase over May of 2012.

As concern about the possibility of a new bubble burst simmers on the minds of market watchdogs, we would be remiss if we did not note, and keep in mind, the very big differences between what we are seeing now and the financial crises we faced during this past 6 years. Gary Thomas, president of Realtors said, “the boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale.”

As interest rates continue to sweetly sit at near record lows, buyers are coming back in droves, but the inventory levels will not accommodate. Reactionaries fail to keep in mind that this is a situation that is much more easily remedied than trying to undo the damage of careless lending and unreasonably soaring property values.

Given the tools and systems, wisdom and experience that have come to us through recent years, it is safe to say that though, like always, it is a good idea to be aware and stay in tune with what is happening in the market, smart real estate investors who keep their head, and hang on to smart systems and strategies, will be just fine.