Think back to 2007. Whether you were in the Northern California East Bay–or anywhere else in the US–you had to cover your eats to drown out the sound of the housing bubble bursting nationwide. San Ramon, Castro Valley, Pleasanton and Dublin were, unfortunately, not immune to the rapidly crashing housing market.
Finally home buyers and sellers can take heart. The East Bay real estate market is making a healthy comeback. Neither buyers nor sellers need panic, as this comeback does not appear to be creating a new housing bubble. Historically, home markets are not afflicted with frequent “bubbles” as are traditional financial markets, but they do occur cyclically.
Housing Bubbles
Housing bubbles involve rapidly increasing prices generated by over-the-top demand and a mistaken belief that these rising prices are a guaranteed future forecast. Supply and demand 101, which always works, states that if demand for ‘something’ increases, while the supply of that ‘something’ remains the same or decreases, prices for ‘somethings’ will increase.
The long-term nature of real estate influences the lack of frequent housing bubbles. Unfortunately, two events always occur at the end of these conditions.
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The last group of home buyers typically end up owning homes that are overpriced for some period.
- Housing bubbles, like other financial bubbles, always burst quickly with a flourish.
Fortunately, the current real estate comeback does not appear to be a preview of a new housing bubble. While there is solid demand, renewed buying and selling activity has been steady rather than frenzied. Home prices are coming back consistently as buyers become more confident in the economic recovery.
No Housing Bubble On the Horizon
A number of factors should prevent a renewed housing bubble. If you’re thinking about buying or selling a home in Northern California’s East Bay, consider the following items.
Better buyers are entering the market. The greater San Francisco-area and its high tech industries are recovering nicely. A better quality–and qualified–home buyer group is back in the housing market. The US Census ranked San Ramon as the wealthiest city in the US, but many qualified buyers, however interested, did not purchase during and immediately after the recession. Even during the rock bottom home price environment that prevailed during recent periods didn’t lure some highly qualified buyers into the market, probably because they had homes to sell. But, now these quality buyers are actively in the market.
Speculators remain on the “sidelines.” Investment speculators always help fuel a housing bubble. However, as foreclosures decline, bank-owned homes and short sales that speculators thrive on reduce the supply of ‘bargains,’ keeping speculating investors on the sidelines.
Home prices and interest rates are still low. While the residential market is rebounding well, home prices remain low and reasonable. Along with stable home prices, mortgage interest rates remain low and affordable for most qualified buyers.
Stricter appraisal requirements. New federal appraisal guidelines, providing for increased appraiser scrutiny, result in more accurate home values, helping both buyers and sellers agree on fair prices. Influencing more conservative and accurate estimates of value, help buyers and sellers experience smoother, faster closings–true win-win situations.
The San Ramon real estate, Castro Valley, Pleasanton and Dublin are experiencing this housing market renaissance. Translation: This is the perfect time to buy or sell a home. Don’t wait–take action now!
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