How will you react as Investors to the Potential Housing Bubble in Denver and Portland?

[Paige Kelsey]

I recently read on BP that 7 markets including Portland and Denver were at risk for a Housing bubble. I am from Portland and our end game is to get back there in a year. The fact is I could not agree more with a housing bubble potentially coming our way! I live in Colorado Springs so we do frequent Denver quite a bit. I know that just here in the Springs there is a 20 year  low of inventory on the market and I believe Denver is the  same if not worse. Live auctions are packed and people are making crazy offers  that there is NO WAY those numbers would work.l I own several rentals here but did also want to buy when we move to Portland. For investors in either area, how does living in a city with a potential housing bubble change your strategies for what you do? 

*Do you wait out times like this?    

*Are you just way more cautious on due diligence?- (however, if it is anything like the Springs now you have to know the market, be able to jump quick and go cash. For example,  I just bought another rental that I close on Thursday. to get that in this market, I had to go cash, forgo inspections, close within a week)

Are you changing what you buy ie commercial ?? 

Any advice would be helpful?

[Steve B.]

As the other responders have said you have to be very careful about reading magazine articles and then taking a one dimensional view ignoring general  demographics while looking at individual market  statistics.  Two major factors you are missing Paige are the basic ratio of the average 30-year mortgage to the average local buyers income.  In recognition of this ratio is Portland in a bubble compared to the greater Los Angeles area?  Which area do you think has more upside based on this hugely importantly ratio?  Another factor is forced appreciation in Portland, not only as Jay mentions due to the UGB preventing build up, but the fact is Portland is still he most affordable mid/major market on the west coast which has a long-term growth trend.  Finally housing is fairly inelastic, slight shortages and excesses in housing can cause huge price swings.    As noted I think there is a good chance of home prices slowing but unless we have a systematic event ala 2008 the demographics still favor Portland.  

As a investment side note, if you take investment advice from published mainstream magazine articles rather then apply your own knowledge and logic to situations you are always going to be trailing average market returns no matter which type of investment you are interested in.