The word ‘bubble’ is getting thrown around a lot these days, provoking thoughts of gloom and doom from the not-so-distant past.
Here is what wiki has to say:
A real estate bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It can be identified through rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline.
But that definition describes the value of any product in a free enterprise system – all prices go up and down with supply and demand.
People who insist on describing today’s real estate market as a ‘bubble’ are trying to imply that rising prices will cause a crash like the last one. Because the media has trained us to prefer hysteria and chaos, we start believing another crash is coming.
Just because prices are going up rapidly DOES NOT mean we will have another crash like the last one.
We need more than just rising prices – we need loads of properties being dumped at any price to burst a bubble. Otherwise, you just have a lot of people stuck in their homes, which isn’t a bad thing – not bad enough for them to sell at any price.
Once we top out, look for prices to meander, not crash. The banks learned their lesson – they will let deadbeats live for free before dumping any more houses, and investors who are receiving solid-and-improving rents won’t be in a hurry either.
Our current tax system promotes dying with your house, so it’s likely that the baby boomers will ride it out too, unless they really need the money.
It’s unlikely that we will have another ‘crash’, but it’s probable that you will be stuck with your house for a long time – like it or not!
Buyer beware – get good help!