Are We Headed Toward Another Housing Bubble?

What’s going on in our market as we head into fall? We may be heading for a shift, but I can say with certainty that we’re not headed for a bubble.

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Today I wanted to stop by with a market update to talk about the current state of the Northern California market and answer some of your questions.

The weather is changing, but the fall market is doing great like it has been all year. There is talk that the market may be shifting, however, because there is some concern over high home prices. We don’t know where the market is going, exactly. One thing I’m sure of is that we’re not heading toward another bubble because this is nothing like 2006.

So what’s the difference between that mid-2000s market when we had the housing bubble and what we’re seeing right now? For starters, there is not a lot of fraud going on right now like there was back then. There are four key factors to consider as well, starting with the price-to-rent ratio, which is about 18% lower than it was in 2005. The price-to-income ratio is also about 12% lower, meaning homes are more affordable for people than they were in 2005. Additionally, the percentage of mortgages for purchases is 15% lower, so there is more cash in the marketplace. Finally, there is about 50% less house flipping happening.

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One thing I’m sure of is that we’re not heading toward another bubble.

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As for questions we’ve received from viewers, well, we have enough for the next 10 installments of our video blog! We appreciate you reaching out to us with topics that interest you. The question I wanted to answer today is, “Is the current pace of home sales sustainable?"

We have had a massive increase in the last five to seven years, but the bottom line is that we are still nowhere near the amount of homes that were selling in the bubble, and we’re on the same pace that we were on before the bubble, not during the bubble. If you want to avoid any risk of a potential market shift, I would suggest meeting with me now to discuss what it would take to get your home sold.

Finally, I wanted to end things on a happy note with a fun story about some clients who recently got married. They each had their own home, but were