Another housing bubble?
You may be hearing this rumor around town. Will housing prices escalate to pre-2006 levels again? Will your home be worth what you paid for it back then? Another way of looking at it is “Will someone want to pay a much higher price for my house than what it’s worth today?”
In some ways, another bubble might seem like a way to make hay while the sun is shining. For homeowners who are underwater on their mortgage, a housing bubble would mean the opportunity to sell when the prices go back up. But whether prices shoot back up again isn’t exactly the point.
Home prices in San Antonio never did really spike the way they did in other harder-hit parts of the country. That’s a good thing for our local economy and it means (in general), that this part of Texas is in pretty good shape. The compound benefit is that even more people will want to move here as the economy remains strong, which is good for housing markets, etc. It’s an upward spiral in the best sense.
But for folks who are behind on house payments or who have a house that’s too much for them now — for any reason — that’s not the reassurance you are looking for. So let’s look at this possible bubble scenario from a practical angle.
Some questions to ask yourself as you decide what to do about your specific situation:
- Will prices escalate fast enough?
- Will incomes also escalate to allow people to buy these homes?
- And will people be able to get the same zero-down loans they got to purchase your home if the price does go up?
The answer to all these questions is “probably not.”
And to add further to the irony of free markets (a little lesson here): if prices rise, then more people will want to sell. And if more people want to sell, and there are more houses on the market, then the demand for your house declines a little. Leave it to the speculators to predict what’s going to happen, but even the highly paid “experts” and research firms don’t really know.
“Speculation.” The word alone makes people giddy. You start thinking about the oil boom in early 1900’s in Texas, the gold rush in the mid 1800’s in California, and the housing rush pretty much everywhere back in the early 2000’s. While oil and gold are pretty much fixed resources, though, people can keep on building houses! Just check out the north side of town lately.
The moral of the story is you have to come up with the best plan for your OWN economy right now. I’m talking about your personal economy. Could be that part of the problems that started the first housing bubble emerged from an inaccurate assessment of personal finances and the belief in a market that never stops getting bigger and better. Mistakes were made, a few traders got rich quick and got out, and others are still plugging away paying for it all. Them’s just the facts.
This talk of another bubble should make everyone just a bit uncomfortable, even if you’re counting on that lottery ticket to make back your first home investment or sell that house you inherited –hoping for a huge gain. Hey, the reality is, investors and homeowners like us could all make a killing along with everyone else IF another bubble actually does emerge.
An even so, I’m keeping a much more sober ear to the ground on this one. You should, too.
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Photo Credit Flickr CC: Tristan Martin