I don't think it's a bubble but rather, a bubbly market. The term "bubble" has strong memories tied to the 2008 housing market crash. A majority of the public is quick to call a bubble just because on the surface they are seeing very high housing prices and slippery lending. However, I invite you join me for my made up bubbly analogy.
When we look at the housing market from afar right now we can see it's not one big bubble but rather a whole bunch of suds. One giant bubble grows slowly and gets bigger from only one or two driving forces and when it pops your left holding the wand with soap dripping down to your elbows.
I see us as in a bubbly market because we have a multitude of factors contributing to so many micro bubbles. Primarily a huge migration from populated to less populated areas of the country due to the pandemic. There are more relocations than ever before. Because so many people moved all once, everywhere saw a inventory shortage, driving up prices. Getting back to the bubbly analogy, everyone went hands in and started swishing all this soap around creating a bunch of suds, a bubbly if you will.
You might say, "well ok, but all of this movement is what essentially caused this, wouldn't people need to keep moving to maintain the integrity of your bubbly. What happens now that people have moved and settled in. Do these little bubbles all pop at the same time. Isn't that essentially the same thing as a big bubble burst?"
Some of these little bubbles will pop, but not all of them and not all at once.The first bubble to pop, I predict will be condo real estate in major cities. Since the pandemic city lifestyles is harder to sell. Landlords burnt by currently pandemic regulations will pause on adding to their portfolios unless its a ridiculous deal. This will create less of a demand and we will see price drops. They wont stay low for long though. Maybe 1, 2 years max. Then we will see GenZ flock to catch these deals and a new migration of flippers targeting the lowest price points as close to the city center as possible. (example: East Boston 2010).
The suburban markets just outside the cities will hold strong and prices will increase at a steady rate. There will always be a buyer who wants a yard and a social life.
Farm and rural areas close enough to a city are being bought up for new development and as they are developed land will only become more scarce and more valuable. Farm land or farming... I know nothing about.
Right now I work for a developer in Northern Alabama and it's really bubbly and sudsy here. I can speak on a multitude of factors that makes me confident there will be no popping bubbles here, only popping bottle!
1. Land, most of the desirable land close to the city is bought, locked up or not for sale. Leaving only a small sliver of developable land to build on.
2.I see first hand how supply and skilled labor shortages are the most direct cause for price inflation on these house prices.
3. Most important, as always though, is that there is a strong continuously high demand for housing. Employers are actively recruiting for over 1000 jobs I can think of without even googling. These manufacturing plants and government jobs are here to stay. We are seeing a funnel of new buyers into a market where supply was low to begin with.
4. Ease of transport. With a major public airport and a private airport it is very easy to get in and out of the area. Not to mention the roads are some of the best designed traffic patterns I've ever seen.
Given that there are a multitude of variable factors independent of one another driving up housing prices here I am confident property values will hold and only increase in the future.
And too all of that I say, Cheers!
