Housing Bubble Chatter

Nef Cortez

By Nef Cortez


As a licensed agent since 1976, I have seen a few cycles of the Real Estate market.  None that I have seen have been exactly like one of the others.  Lately, there has been a lot of “Chatter” in real estate circles, or in articles written about whether we’re in the middle of another housing bubble, or at the brink of and about to head into a real estate housing recession.

The interest rate environment had been trending upward for the previous few months this year, and it seems to have had an impact on the number of sales being transacted, with fewer properties being sold in the first part of this year as compared to last year.  After reaching an average high of close to 5% in the last few months, the 30 year mortgage has settled back into the mid 4% range.

The decreasing affordability of housing has triggered the increasing number of news articles and housing industry pundit discussions about a slowing down of the housing market.  The increase in home prices year over year exceeding 5% combined with the interest rate increase seen lately in the 30 year fixed rate mortgages are but two financial factors that have led to fewer sales transactions this year (as compared to last year). These discussions lead into the topic of a recession in home prices as well in the not to distant future. The inventory of homes on the market is slowly increasing, with the length of time that homes are on the market slightly increasing as well. These two factors in combination will provide an easing in the upward pressure on prices. Before a drop in prices can occur, a slowing down in the rate of increase must occur, followed by a leveling off in the increase in prices.

According to the Federal National Mortgage Association (Fannie Mae), a Government Sponsored Entity created by Congress to provide liquidity to the housing market, the “Consumer optimism about purchasing a home continued tot fade in July, as low inventory, rising prices and higher interest rates are affecting their market perception”, Fannie Mae said.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.