Why No Bubble

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There are several reasons why our Chief Economist does not believe there is a housing bubble today in the U.S.

Below is a slide he shared at our recent market Forecast events.

It shows U.S. Home ownership rate, which is simply the percentage of the population who own their home (versus renting).

The long-term average is 65% represented by the red line.

In the graph you can clearly see the bubble forming. Starting in the mid-90’s, driven by several political and economic factors, more people than ever before became homeowners.

 

 

Then, starting in, 2008, the bubble burst and the percentage tumbled back down.

Now, as you can see, we are back at a “normal” level that resembles the long-term average.

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If you would like a copy of the entire Forecast presentation, go ahead and reach out to us. We would be happy to put it in your hands.

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Is There A Bubble?

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Economists say there are three reasons why we aren’t in a housing bubble today.

The first reason they mention is the amount of new home construction compared to the 2006 housing bubble.
Today, along the Front Range, new home starts are down 38% compared to 2006. This is despite a much higher population than 12 years ago.
A major factor that caused the bubble was the glut of new construction inventory which doesn’t exist today.
Metrostudy, a leading new home research firm, says that Front Range builders need to have built 30,000 more new homes over the last 5 years to keep up with demand.
To see the whole story about our market along with other stats and trends, watch the recording of Tuesday’s Windermere Workshop right here.

If you want to be totally clear on all the stats, facts and trends in Colorado real estate so that you know what the future value of your home looks like, watch this video.
This is a complimentary service for our clients and friends.

 

 

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Bubbly?

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Because our Northern Colorado market has been so active over the last four years, clients often ask us if we think there is a housing bubble forming.

There are several key statistics which we track closely in order to answer that question.

Here is one fact that we find to be insightful…

One of the root causes of the last housing bubble was the glut of inventory, and specifically new home inventory. Quite simply, the market was being oversupplied with new homes. The rules of economics say when there is oversupply, prices must come down.

Are we in a housing bubble?

Today, there are far fewer new home starts compared to 2004 and 2005 when the last bubble was forming – despite there being a larger population.
According to our friends at Metrostudy who track the new home market, Northern Colorado has had 4,452 new home starts in the last 12 months.

That number is only 60% of what it was at the height of construction in early 2005.

It is also interesting to note that over the last 12 months there have been 4,473 new home closings which shows that demand is keeping up with supply.

So when you drive around Northern Colorado and notice all the new homes being built, know that construction activity is far less than what is was during the bubble and that demand is keeping up with supply.

In case you missed our annual real estate Forecast event, you can reach out to us to see the presentation slides or receive a video recap of the information. Just email us at colorado@fortcollins.com

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