Are we forming another housing bubble?

housing-bubbleNot only are home values rising quickly, but we are seeing home-buyers pay as much as $100,000 over the asking price just to get their offer accepted. Some experts claim this is reminiscent of the  real estate bubble formed in 2002-2007 when the home-buying frenzy was at it’s peak. I beg to differ.

I’ve never been a rah-rah real estate guy. I do believe that owning a home is an essential aspect to a well-designed retirement strategy, as noted in Step 8 of The Life Plan. There have been many times in the past when I was very anti-real estate. I sold my home in 2005 for a nice profit and everyone thought I was crazy…for about 10 months.

What’s happening now is no where near the formation of a bubble, nor is it anything like what happened in the “Wall Street Mortgage Era” of 2002-2007 and here’s why…
#1 – The Buyers. In the bubble-days, many buyers could not legitimately afford the homes they were buying. The financing was too easy to obtain and too creative to work in the long-run. Today, financing isn’t that easy to get and the most aggressive program out there is FHA, which still requires a down payment from the Borrower and a fully documented qualification. Also, in the San Diego Real Estate Market, over 38% of the transactions are in ALL CASH. The people buying today can legitimately afford the homes they are buying…a crucial differentiator.
#2 – Where we are coming from. In the bubble-days, home values were making all-time highs. People were buying homes at highest price in that property’s history. Today, home values are still down A LOT from where they were at the peak. This is how a market “finds itself”. You go t0o high, then too low, and find yourself in the thick of it somewhere in between. Right now, we are somewhere in between, which is where we should be…

Does this mean property values will continue to rise at the current pace? Absolutely not. I expect them to level off by year’s end. But, don’t expect home values to go any lower in the San Diego Real Estate Market any time soon. There is just too much demand to live in this paradise we call home 🙂

Other topics discussed today:
– The leading cause of Bankruptcy in the United States and how to avoid it
– How the law helps Consumers when it comes to Credit Repair
The Los Angeles Real Estate Market; is it as crazy as San Diego?
– GOLD might be the worst investment I’ve ever seen
– The only Bonds you should own… Apple Bonds. That is, if you can get them!

Today’s On-Air Experts:
Mike Watson, San Diego Credit Repair Specialist with
Blayne Pacelli, Los Angeles Real Estate Expert with Rodeo Realty

Listen to today’s show here:

Categories: Buying Real Estate, Credit Repair, Credit Score Secrets, Financial Planning, Los Angeles Real Estate Market, Mortgages, Radio Shows, San Diego Real Estate Market, The Life Plan

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2 replies

  1. Derrrick

    With employment still enemic and incomes reduced where is the money coming from to purchase a home? All cash deals? Are these investors/institutional buyers looking for bargain-flip deals?

    Date: Wed, 1 May 2013 23:17:15 +0000 To:

  2. Some are institutions, Jay, but many are just accomplished professionals who have saved money and done well for themselves. A lot of the savvy investors out there are fearful of the risk baked into the Stock Market right now and have exited the “paper investment” world for the “hard asset” world. If employment picks up, Real Estate should get even stronger! 🙂

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