The bubble’s gotta burst, right?
If I had a dollar for every time someone told me that the housing bubble would eventually burst, I would be on a quiet beach in the Caribbean right now. The last 18 months has been the craziest time I’ve ever seen in real estate (and that’s including the 2008 bust that put everyone out of business). Homes are getting snatched up left and right, going over asking, crazy appraisal gaps, and the wait list to build a new home are forty to fifty people long. Earlier this year, I had a buyer that was looking for a small condo. Nothing strange; just a 2 bedroom condo within a 30 minute commute to her job, under 300k. Finding the condo was not the difficult part. There were several that popped up week after week. Getting an offer accepted while staying in our budget was the hard part. At one point, we were outbid on a 250k condo by $60,000! It was stressful, and at some points just downright discouraging. However, we prevailed, and we won over 6 other offers for a beautiful condo close to work.
In this seller’s market, it can feel overwhelming and hopeless unless your pockets are lined with 1,000,000+ in cash. In fact, a recent study cited by the Denver Post showed that home prices have risen over 457% in the last 31 years. It’s clear if you look at inflation, home prices have skyrocket beyond what other life necessities have. It can’t go on like this, right?
And here is the point where I break your heart. I honestly don’t know what things will look like in one, five, or ten years. You can ask 10 different real estate experts and get 10 different answers. But, I will give you my 2 cents.
No, it won’t burst. This is different than 2008, where the problem laid with the lenders loaning more mortgages than they should have, with terms that the buyers were not qualified or prepared for. That caused a rise in sellers underwater on their mortgage, and no one able to sell to get out from under. Today is a completely different problem. Covid has wreaked havoc on supply chains, employment, and inventory. Economics 101 tells us that small supply creates greater demand, thus being reflected in pricing. Similar to that Tickle Me Elmo phase we had in the mid 90s. Or even the newest release of the Playstation. The amount of homes on the market cannot meet the needs of the number of buyers. At one point back in January, I saw less than 3,000 homes available on the mls for the entire state of Colorado!
While I don’t think the bubble will burst, I do suspect that things will begin to slow down. With more people going back to work, the more supplies we have to build, the more inventory we have, the less demand there is for housing. The last year has seen a sharp increase in the appreciation of homes. While I do think that home prices will still rise, there is hope that the rate will at least slow down.
