Re Bubble

Bubble

 

The activity in the Front Range market is causing us to hear the bubble question again.

People are curious to know, based on recent growth in price appreciation, if we are in a housing bubble.

This question seems to crop up when prices go up.

While we do not believe that the current double-digit price appreciation is sustainable, we firmly believe we will not see prices crash or see any kind of a bubble bursting.

Here’s why we think that…

This past Tuesday we hosted a private online event for our clients which featured our Chief Economist Matthew Gardner.

Matthew is well-known and well-respected in the industry.  He is often quoted in leading real estate publications.

He sees four reasons why there is no real estate bubble that is about to pop in Colorado.

  1. Inventory is (incredibly) low.  The number of homes for sale is down over 40% compared to last year.  The market is drastically under-supplied.  Based on simple economic principles of supply and demand, inventory would need to grow significantly for prices to drop.
  2. Buyers’ credit scores are very high.  The average credit score for buyers last month, for example was 759.  So, by definition, average buyers today have excellent credit which means there is low risk of them walking away from their mortgage and causing a foreclosure crisis.
  3. Buyers have high down payments.  On average, buyers are putting 18% down on their purchases.  This means that prices would need to fall by a considerable amount in order for the average buyer to be ‘upside down’ on their mortgage.
  4. Owners are equity rich.  Well over a third of property owners along the Front Range have more than 50% equity in their homes.  This means that a severe economic downturn causing a slew of distressed properties to hit the market is highly unlikely.

Bottom line, as Matthew Gardner reminded us, what we are experiencing in the economy today is a health crisis not a housing crisis.

If you would like a recording of the private webinar we would be happy to send it to you.  Just reach out and let us know.

The post Re Bubble appeared first on Fort Collins Real Estate | Fort Collins Homes for Sale & Property Search.

Re Bubble

Bubble

 

The activity in the Front Range market is causing us to hear the bubble question again.

People are curious to know, based on recent growth in price appreciation, if we are in a housing bubble.

This question seems to crop up when prices go up.

While we do not believe that the current double-digit price appreciation is sustainable, we firmly believe we will not see prices crash or see any kind of a bubble bursting.

Here’s why we think that…

This past Tuesday we hosted a private online event for our clients which featured our Chief Economist Matthew Gardner.

Matthew is well-known and well-respected in the industry.  He is often quoted in leading real estate publications.

He sees four reasons why there is no real estate bubble that is about to pop in Colorado.

  1. Inventory is (incredibly) low.  The number of homes for sale is down over 40% compared to last year.  The market is drastically under-supplied.  Based on simple economic principles of supply and demand, inventory would need to grow significantly for prices to drop.
  2. Buyers’ credit scores are very high.  The average credit score for buyers last month, for example was 759.  So, by definition, average buyers today have excellent credit which means there is low risk of them walking away from their mortgage and causing a foreclosure crisis.
  3. Buyers have high down payments.  On average, buyers are putting 18% down on their purchases.  This means that prices would need to fall by a considerable amount in order for the average buyer to be ‘upside down’ on their mortgage.
  4. Owners are equity rich.  Well over a third of property owners along the Front Range have more than 50% equity in their homes.  This means that a severe economic downturn causing a slew of distressed properties to hit the market is highly unlikely.

Bottom line, as Matthew Gardner reminded us, what we are experiencing in the economy today is a health crisis not a housing crisis.

If you would like a recording of the private webinar we would be happy to send it to you.  Just reach out and let us know.

The post Re Bubble appeared first on Fort Collins Real Estate | Fort Collins Homes for Sale & Property Search.

Bubble Burst

Every so often we will hear a concern that another housing bubble is forming.

To help answer that question it’s valuable to look at the reasons that caused the last one.

There were three main drivers of the bubble that burst in 2008:

  1. Easy Credit – loans were very easy to attain
  2. Over-Leverage – people were using their homes at ATM’s
  3. Over-Supply – too many new homes were being built

Now, let’s compare that to today:

  1. Stricter Credit – the average home buyer today has a FICO score of 755
  2. High Equity – collectively, U.S. homeowners have $19 Trillion of equity in their homes and collective mortgage debt has not increased for 13 years
  3. Under-Supply – today we are building only two-thirds of the new homes being built in 2004 yet the population is much higher

Given this healthy information, we don’t see another housing bubble forming today.

If you would like to see a video recap of our annual Market Forecast you can watch that HERE.

The post Bubble Burst appeared first on Fort Collins Real Estate | Fort Collins Homes for Sale & Property Search.