ANOTHER BUBBLE ON THE RISE?

Thoughts of “What if?” sit in the back of my head.  People are willing and suddenly able to spend a lot more money on buying a home than they were not too long ago.  “It’s amazing how fast people forget.  Eddie told me prices are back to where they were when I left,” says my uncle John, a real estate broker in the Palm Springs Area, in a recent conversation we had about the market in the Bay Area. John sold his house in Redwood Shores in 2005 and moved to La Quinta. 

I often speak with John and other realtors outside of my area to have a greater understanding of what’s going on in the world of real estate beyond what I am seeing.  It’s crazy how fast the real estate market in the Bay Area has turned from cold, to lukewarm, to scalding hot.  This recent trend is oh-so-familiar.  It makes you wonder what’s in store for us next- are prices going to keep going up, is buying a home going to become even more competitive than it already is, is this just a bubble and is the market going to crash again?

It’s hard to believe it could become even more expensive or competitive to buy a home than it is now.  The reality is, today it’s probably harder to buy a home than it was last month, or the month before that, or the month before that.  Each property that sells is setting the bar for the next to come on the market.  If buyers keep outdoing each other, which they currently are, there is no end in sight.  

If prices drop and there are no longer 10-20+ offers on every home that hits the market, then what happens?  Well, this has happened before, and it probably will continue to happen on some scale over time.  Worst case scenario, it will probably just last 5-7 years before the market turns around again... but no one really knows.  It shouldn’t make a difference to people that have recently bought or are buying now, with fixed rate loans that do not have to move and don't intend to sell.  Assuming you can afford your mortgage and are not in a huge danger of losing your job/receiving pay cuts, or relocating and have to sell your home.


So do you buy now or hold out until prices drop or demand stabilizes (if it does)?  This is a tough one- it seems like you’re damned if you do and damned if you don’t.  The pros to buying now are that interest rates are incredibly low (of course this isn't applicable to cash buyers) and prices haven’t really exceeded peek prices (2005-2007 prices) in most areas.  The cons are there is extremely limited inventory of homes for sale, you will be paying top dollar, and competition is heavy amongst buyers.