The new real estate bubble is building fast…it is different than the last bubble which was made up of a huge over-supply of homes and the blind reliance on the hope that the prices of homes would continue to accelerate at a record pace forever.
This new bubble is comprised of buyers. Did all the buyers who would have bought in the last year disappear, or are they just waiting for good news?
Much like the TV show ,“Lost”, whose characters seem to frequently disappear and then reappear, the buyers who disappeared when the big, sloppy Real Estate Bubble burst are, for the most part, still there.
Which buyers will probably not return for a very, very long time? The “flippers” have pretty much disappeared. Many of them were very clever individuals who bought a run-down house, cleaned it up, and then sold it for a healthy profit. Were it not for rampant price inflation, they would not have been as successful. Many of them are now sellers.
Another category are those buyers in the last few years who were able to get into a home even though they had no money, no credit, and not enough income to pay the initial payment, let alone the huge increase in payments lurking around the corner after the bubble burst. Again mortgage brokers, lenders, appraisers, and the people who insure and purchase these loans were counting on continued price inflation to keep pushing prices upwards and protect their investment.
But in most areas of
Why do I feel most of the delayed buyers are still out there? Take a look at the numbers:
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The US jobless rate averaged around 4.5% in 2006 and 2007….the lowest in six years.
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Our so called recession economy in the U.S. added 1.1 million jobs in 2007. (Buyers with jobs…what a concept!)
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The Federal Reserve has lowered short-term interest rates six times recently, which means the cost of housing should go down, and the cost of debt for US citizens will also decrease.
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More than half of the families in the US now earn more than $54,000 per year.
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The net worth of the American household has risen for 19 consecutive quarters.
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More than 20% of the population of Oregon moved here from out of state in the past 10 years.
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The State of Oregon projects almost 100,000 people between the age of 40 and 79 to move into the Portland Area, or almost 1,000,000 into the State in the next 10 years.
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Average wages for Americans have risen by 8% in the last two years.
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During the same period, there were nearly 2,000,000 new households formed.
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Employers are planning to hire 16% more college graduates in 2008 than they did in 2007.
In my visual of this new Buyer Housing Bubble, each one of these statistics is a gigantic shot of air into the bubble. More people, more jobs, more college grads, more people moving into the state, more families being formed, lower interest rates, lower prices…this new bubble is getting very big very fast. I really hope it doesn’t burst like the last one. Rather it would just make that funny “ffftttttt” sound when somebody lets go of a full balloon and it flies around the room.
Listen for the “ffftttttt” when the media begins to talk about good economic news rather than use scary stuff to attract readers and viewers.
Things are looking pretty good right now.
As always, these are just my opinions. Sometimes I am right!
Gary Taylor, CRB, GRI is the principal broker for the Sunset Corridor office of RE/MAX equity group, inc. He currently serves on the Board of Directors and is Chairman Elect of the Regional Multiple Listing Service. He was awarded the PMAR Realtor of the Year for 2007, the Million Dollar Club’s “Managing Broker of the Year” for 2006, the Oregon CRB of the Year in 1996, and WCR Member of the Year in 2001. He was also a Notary Public in 1974. He can be reached at 503-495-5577 or garyt@remax.net
