People ask, “Are we in a bubble?”
If you mean a market where prices have escalated rapidly, then yes! The SD Case-Shiller Index is +59% in the last eight years – an average of 7% per year!
We’ve seen 7% appreciation per year before – what’s remarkable is how long this hot streak has lasted. We’ve had eight years of solid appreciation before (1997-2005), but that was fueled by no-qual loans. This time, buyers are faced with strict underwriting guidelines, but they want a house bad enough that they find a way. The unusual twist is how exploding prices haven’t caused more long-timers to sell – as a result, we’re as competitive now as ever. This is the strongest market any of us have ever seen!
Causes:
- Current homeowners don’t need to move.
- Current homeowners can’t find a better value.
- Low supply of new homes.
- Buyers on the fringe fear that they could get priced out.
- Severe traffic makes buyers reluctant to go farther out.
- Too many people live here now.
- Too many realtors now.
- The rich get richer.
The common theme is scarcity.
For buyers and sellers, it can be a wicked ego-and-greed cocktail mixed with some basic hoarding instincts. Winning becomes more important than money – and buyers keep paying more for a house in order to join the club!
