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Are We In A Bubble In The Real Estate Market?

Dave FinburghMany clients are asking the same question….are we in a ‘bubble’ in the real estate market? This is a question that we are hearing more and more of on a daily basis.

I wish there was an easy answer to this question. Unlike the last downturn in the housing market, which was sparked by a very ‘lax’ mortgage and loan industry, this market is not under quite the same pressure. Instead, there is a lack of inventory on the market and there seem to be more buyers chasing fewer sellers. However, what is most concerning is that the price to affordability ratio is still far from healthy! The average incomes in most large cities lag far behind the necessary income levels to support home ownership. This is most prevalent in all of the larger communities in California.

While the Case-Shiller index is showing a continued increase in housing prices, the number of homes that are selling in the highest priced neighborhoods is in fact declining! Buyers today seem to be in no hurry to acquire a property in the upper level

price ranges, and in fact many are sitting on the side lines playing the stock market instead. ( We are seeing record stock pricing right now—-is this too a bubble??)

One thing that I believe to be certain, the real estate market always adjusts, and whether that means it will continue to show strong growth or will step back to allow for the income/affordability ratio to improve, makes me believe we shall have to wait and see. Please do call me at (619) 894-9000 with your thoughts. I will be pleased to discuss this very hot topic.

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