Prices are finally rising, but are they rising too quickly? Some recent news articles have caused concern that the rebounding market is rebounding too quickly. Rest assured, the housing market is far from bubble territory. Prices are rising quickly and that makes for catchy headlines, but they aren’t anywhere close to where they were at the biggest inflations and signs point to the real estate market leveling out.
This chart shows how some of the worst hit areas of the country are currently a little over-valued. However, it also shows the vast differences, in some cases, of the currently over-valued price compared with the peak price for that area.
In the chart below, recently posted by the Economist, we can compare the trend in Chicago with those of Los Angeles and San Francisco, as well as other cities that are not included in the chart above. See the link to the original Economist article where this graph is interactive.
We are still far from the worst of the bubble. The Home Price Expectation Survey, which is conducted among a panel of 100 economists, real estate experts, and investment and market strategists predicts an annual appreciation of 4.1% to 2017.
That’s less than 1% higher than the average appreciation rate before the last big bubble. When you compare the cumulative appreciation expectations to 2017 the average amount predicted by both the bulls and the bears of those surveyed is 22.3%, which is the same as the trend was before the bubble.
So, are we seeing the beginning of another bubble? Experts predict no!
Prices are still very low compared to where they have been and the experts do not see them continuing to skyrocket. Mortgage rates are starting to rise, inventory is growing, and the increase in asking price will slow the activity of investors. With rents rising, unemployment rates slowly decreasing, and more people moving beyond their financial troubles of the past, and again having the capability to purchase a home, jobs are being created and the real estate market is helping boost the overall economy.
The chart below shows, on average, how much income one home sale brings into the economy per state.
Currently we are not seeing a housing bubble. We are just seeing a growing economy that hasn’t been experienced in years. Does this mean we won’t see another real estate bubble? Probably not. Real estate is a market after all. Just like every other market it has its ups and downs. Will we see a perfect storm like the one we are coming out of again? Hopefully not in our lifetimes!
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Whether you decided to list your home on your own or hire an agent to represent you it is important to carefully consider all the pieces that are necessary in marketing your home for maximum exposure. Real estate transactions are big and stressful. By taking the time up-front to prepare yourself and get started on the right foot you can save yourself time, money, and stress!
