Real estate bubble? It depends where you live.
The news media has been a buzz about the “bubble” theory. We hear it daily, “The real estate bubble is going to burst!” Personally, I don’t think that this theory is accurate and here is why.
- The “national” real estate market is comprised of many local markets, which makes it hard to generalize about one overall market. In my experience, the real estate market is too intricate to make such broad generalizations. What is happening in Seattle or Bellevue is not directly related to what is happening in New York or Florida. It is important to take a look around locally and see what is really happening. On the Eastside, we continue to see strong job growth, limited new construction, and upward population and economic trends.
- The real estate market is structured a little bit differently than the stock market – it is generally less liquid. Since real estate is much harder to sell with ‘one click’ (as you can with stocks), the real estate market usually won’t “crash” or “explode” overnight. The media has been talking about a bubble for years. In fact, if local economies do dip, it could take awhile to see any significant change in the real estate market. In my opinion, we are more likely to see real estate prices remain flat rather than experience a big price drop.
- Additionally, there are many economic trends that can cause the real estate market to remain strong in our area. In my opinion, real estate investment has been a good long term investment. In general, I believe real estate is a good investment because people use their homes to live – unlike stocks, where a company could go out of business. Homes on the other hand should still be around 15 years from now. While real estate speculation for the short term may be risky, my experience leads me to believe that the long term investor should come out ahead.
In my opinion, interest rates will also have an impact on the real estate market, but large swings do not normally occur overnight, or even over several months. Do you have a back up plan? If you do not have an urgent need to sell, you should be able to endure most real estate market trends. Historically, real estate is usually one of the safest and most lucrative investments available.
Lori Midttun
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