ARTICLE BY: Maggie Clemens
Is The Housing Bubble About to Burst Again??
This is a question I am getting more frequently now as headlines boldly declare that housing sales are down. There is speculation that we are in another housing bubble which is ready to burst.
The key word being “speculation.”
Let’s look at some key data points here in La Mesa, specifically 91941 zip code. Please refer to the metrics provided on the back page.
While we have had a 66.7% increase in new listings from July 2017 to July 2018, the number that went into pending dropped 25% in that time. Closed sales dropped 8.6% and the Months Supply of Inventory increase 61.1% year-over-year.
First, it is important to remember real estate is a cyclical business. Historically we know the busiest time of year begins in April and activity starts to slow down in August. While it is not surprising to see a slow down as we head into fall, it did begin a little earlier in the season. We need to only look at our overall economy for answers.
When the economy is good more people take more vacations, typically before the school year begins is a great time to take it. That can take potential buyers out of the market until they return and get settled back into their routine.
Another result of a good economy is that the Fed starts to bump up interest rates. While many buyers believe that the mortgage rates in the mid 4% are high, we know historically they are still very low. Buyers are often shocked when I tell my story of purchasing my first condo at a 17% mortgage rate in the mid 1980’s. Still even the buyers who recognize that 4.5% is still a good rate take more time to assess their situation before pulling the trigger on purchasing a home.
Lastly, sellers tend to be overly optimistic when pricing their homes. When the home isn’t priced for the current market it stays active longer and because buyers aren’t used to that yet it causes them to wonder “what’s wrong with it?” It can be the beginning of a vicious circle that can be avoided.
In closing, there is a huge difference between a market that is shifting and a bubble that is ready to burst. Whether you are a buyer or seller it is and always will be about being strategic in the current market, not trying to time the market.
I would be happy to discuss buying and selling strategies with you if you should find the need. Give me a call any time at 619-800-1145, or email me at [email protected]
