Is This a Housing Bubble?

Are you nervous about the state of the real estate market? If you are, you aren’t alone. Many fear that we are returning to conditions that existed before prior housing bubbles. In fact, a new survey reports that seventy-seven percent of home buyers and sellers believe there’s a housing price bubble where they live. But, are we really in a housing bubble? According to many leading housing economists, the answer is, “No.” Granted, prices have risen dramatically, shattering all expectations, but we are not experiencing the same market conditions that have led to past bubbles.

According to Lawrence Yun, the National Association of Realtors Chief Economist, this isn’t a bubble and this isn’t 2006. What’s the difference between then and now? Lending. Credit remains tight and lenders aren’t issuing risky loans. Yun, along with many economists, believe (and we tend to agree), that today’s market boils down to simple economic principles — principles of supply and demand.

Competitive Market

You’ve heard about bidding wars brought on by limited inventory and buyers competing for properties. Competition that has bid prices up. Way up! Historically low interest rates and the largest population — the millennials — reaching home-buying age, all play a role in today’s hot housing market. So does the pandemic. People working from home has increased the demand — demand for more space and for single-family homes. Remote working has also allowed for a large percentage of people to live almost anywhere. Hmmmmm……Hawaii anyone?

Rising Home Prices

Home prices are rising and many remain concerned about the future of real estate and our economy. There are definitely things to be concerned about. Inflation, government spending, the growing deficit, supply chain issues, and increasing interest rates, to name a few. But, even with all the concerns, the National Association of Realtors is still predicting price growth between 3% to 5% in 2022. That’s lower than last year’s phenomenal growth, but it’s still growth. And, that is on a national level.

So, what about Hawaii?

Do you think it’s a bubble? A bubble that is going to burst? Consider this: Hawaii is one of the most beautiful places on the planet. People want to live here. We have limited land space and a limited supply of housing. Remote working is here to stay. Plus, the mainland is experiencing exceptionally cold weather. Could those winter storms have an impact on buyer decisions? On demand for housing in Hawaii? Maybe. And, what about our international buyers? What will happen when they return to the scene? Hmmmm…..it does cause one to wonder, doesn’t it?

We really can’t predict what will happen. But for now, we don’t think this is a bubble. We agree with Lawrence Yun — the principles of supply and demand are simply at play. Consumer desires, dreams, and destination aspirations are also at play.

Hawaii is unique. Special. And, in a way, its own “beautiful bubble.” As such, we think the only bubbles we may see in Hawaii for a while are the ones Don Ho sings about. So, sit back, relax, and enjoy an iconic song from an iconic performer, and remember, housing in Hawaii may not be in a bubble, but living in Hawaii will make you feel warm all over…..