Browse Arizona Real Estate 2008 and newer > Real Estate News
Browse Real Estate Archives > Real Estate News
The Housing Bubble Revisited
May 10 , 2005 by Kathleen GordenContributed by Bob McCord, CEO of the Success Financial Network
It's difficult not to write about the "housing bubble" given the media's continued effort to make it happen. There is no question that the pace of sales has to slow and that double-digit price increases can't continue. But that doesn't make a bubble.
The Wall Street Journal recently had an article that indicated there were few signs of a housing slow down. In fact, most comments were that sales "….are actually stronger this year."
One of the quotes in the article was from Bill Jilbert, President of Coldwell Banker Success Realty (remember him?). Bill was quoted saying that days on market in Phoenix "….are so far to one side (improved) that it is not even fun…." Come on Bill, we're all having fun.
I recently came across an article in Fortune magazine from May 1996. The concern was that rates had gone up to 8% and sellers were concerned. Demographics were bad and jobs were hard to find. Prices in Salt Lake City were up by 17% in the previous year (Detroit was up 15%; and Cleveland up 11%). But the conclusion was that there was little reason to fear a collapse in demand on prices.
Today, demographics are as good as they can get (baby boomers have lots of money). Interest rates have gone back down (30-year rates are below 6% again). Prices in most places are reasonable (Salt Lake City prices are soft, Detroit was up 3% in 2004 and expected to be up 4% in 2005; Cleveland was up 3% in 2005 and is expected to be up nearly 4% in 2005). Every one of the 23 largest markets expect prices to increase in 2005, albeit at a slower rate than 2004.
So as the concern in 1996 was ill placed, so are the concerns today. Price increases will slow. The pace of sales will moderate. But a bubble? I still don't see it. But then, I am not considered an expert by the media.
Bob McCord CEO of the Success Financial Network
