The housing bubble is real.

the housing bubbleRemember the last housing bubble? You know, the housing bubble that knocked the US Economy out-cold a few years back… Well, another housing bubble is forming and everyone in the industry knows it. It’s not necessarily a bad thing, as long as you are aware of it, especially for home-sellers. Just this week I’ve heard two stories from Real Estate Agents in San Diego whom both listed properties for above “market value” and both received multiple offers for 15+% more than the listed price with well-qualified buyers and appraisal contingencies removed.

The last housing bubble was especially damaging for two reasons. People were buying homes they couldn’t afford with financing that was perpetuated by Wall Street & there was a normal supply of inventory throughout. When that housing bubble burst, it took down insurance companies, mortgage insurance companies, lending institutions, Wall Street firms, Banks, Credit Unions and all kinds of consumers, business owners…the list goes on and on.

This housing bubble is different. Home buyers must legitimately qualify for loans, many are using bigger down payments and inventory is very thin nationwide. In San Diego’s real estate market, there is only 1.5 months of inventory for sale. That’s scarcity. What this means is, when the market starts to roll over, flatten out, or just cool off, we have several layers of protection in place that didn’t exist last time around. The inventory situation will protect those who need to sell since there is cushion between where we stand today and where a “healthy” inventory would be. Also, most of the buyers in today’s market are very well-qualified and well-off financially OR they are investors and Wall Street Firms. All of which would be able to handle a loss a lot better than the average person who got the smack-down last time around. In short, the people who stand to lose if we see another housing bubble burst, are not the same “average Joe’s” as last time. This time, it would be hitting the 1%’ers.

The only people who need to be cautious of this housing bubble are home buyers who have a short-term time horizon. Remember, owning real estate is an essential part to a retirement strategy. If you can buy a home, afford the payment and love the property, then it’s worth buying in any market. If you have short term plans to live in the home, (less than 7 years) then this market is very risky for you. Plan accordingly.

Today’s podcast with full discussion here: 

Big thanks to today’s on-air guests:
Jarod Cauzza, San Diego Trust Attorney with Neil Dymott
Jon Jertoz, San Diego Mortgage Lender and Top 1% mortgage guru nationwide with Guaranteed Rate
Billy Colestock, San Diego Real Estate Agent with Keller Williams in Fashion Valley

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