SAN DIEGO—Some experts are speculating that another housing bubble is looming in some markets, but, as we recently reported, Norm Miller, Ph.D, Ernest W. Hahn Chair of Real Estate Finance in the School of Business Administration's Burnham-Moores Center for Real Estate at the University of San Diego, refuted that speculation, saying while there is some threat of a “tech bubble” in markets that are overly dependent on tech stock, a general housing bubble is not something to fear at this time. We asked Daren Blomquist, VP of RealtyTrac, for his views on the subject.
“Some markets appear to be frothy when we look at affordability levels now compared to historic norms,” Blomquist tells GlobeSt.com exclusively. “San Diego is one market right on the edge of crossing over its affordability norms and becoming less affordable than it has been historically. What appears to be playing out in most of those frothy markets is that home price appreciation is slowing down dramatically and flattening out. For example, in San Diego we've now seen two consecutive months in April and May where home prices are up just 1% year-over-year. A year ago, in May 2014, home prices in San Diego were up 11% annually, and at the height of the home-price recovery, in July 2013, home prices in San Diego were up 23% year-over-year.”
Blomquist says it's possible home prices will actually go negative in some of these markets that have become overextended, but it's unlikely that we'll see that domino into another wave of foreclosures like last time around because the buyers of the past few years have much more skin in the game with their purchases. To walk away from the money they have invested would not be a rational decision, even if the property has lost value.
“There are also a few of these frothy markets—and submarkets within the frothy markets—where home prices will continue to go up well past historic affordability levels, thanks to the impact of international buyers running to the safety of the US real estate market and not constrained by affordability,” Blomquist adds. “Probably the best examples of this are San Francisco and New York.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
