Are we in a Bubble?

The Seattle and East Side prices are jumping so fast, I regularly get asked “are we in a bubble?” The answer I give is always the same. While the rise in prices is just like we experienced during the last bubble, the situations are greatly different in two major ways.

The first large difference is the lending rules. In 2005, 2006, 2007 the lender had to verbally verify your income. The results were ugly. If you had a pulse and said a large salary you could get a huge mortgage. Currently, the lenders need to verify your salary with your company and tax returns. In addition, if you make your money on commission or largely in cash, there are several more hoops to jump through. In fact, the average credit score of an individual denied a loan last month was around 720!!!

The second major difference is the supply and demand. While the supply was low last time also, the demand is not the same. Currently we are averaging an additional 52,000 individuals moving into the King County area each year. That is a net number – meaning we have removed all the people who have left the area and have passed away. Unless companies in the area stop hiring in a really big way, this demand is not going away.

While there are other large difference these are the two major ones. So while it often feels like a bubble, I don’t think it is. However the market will not forever be increasing at the current rate. Remember that real estate tends to move in 10 year cycles. We can expect it to slow over the next few years. But slowing is normal.

Have a great day,

Darcy

Posted on March 25, 2018 at 12:28 am
Darcy Hardy | Category: Uncategorized