By Jason Boone
Home values have grown significantly since the depths of the Great Recession. There is no denying that. Here in Bend, Oregon, the monthly median price has grown from a monthly low of $166,000 in November 2011 to $339,950 in October.
For anyone who lived through the tumultuous times after the real estate bubble burst in 2006, such growth is bound to give one pause.
Are we in another real estate bubble? Well, according to at least one economist, this is no Central Oregon real estate bubble. One big difference now is that Central Oregon is not seeing anywhere near the speculation that drove the market before the bubble burst.
An interesting story by Bloomberg Business shed some light on the subject, and it should be heartening for those who are concerned that history is repeating itself.
It turns out there are some key differences between those unwieldy days that inflated the national real estate bubble and today. For one, research by the Federal Reserve Bank of San Francisco suggests that the increase in prices does not appear to be “suggestive of a credit-fueled bubble.”
Another key point from the story is that the ratio of home prices to rent is more balanced than during the bubble years. In other words, rent has risen enough to suggest that the rise in home prices is justified.
This has certainly been the case here in Bend, which is experiencing a historically tight rental market with vacancy rates hovering around 1 percent. Factor all of it together and right now it appears that buying a home is still a fundamentally better decision for many.
There are other significant differences between now and the housing bubble:
- During the peak of the bubble there was a glut of homes for sales. In fact, during the peak in median home prices in Bend, there was an average of 18 months of inventory. Now? Currently there is a housing shortage in Bend with less than three months of inventory on average in 2015, according to the latest data compiled by the Skjersaa Group.
- Unlike the bubble fueled by speculation with buyers jumping on a home just to flip it a few months later, first-time homebuyers are now a much larger share of those who purchase homes.
- The job market in Deschutes County is strengthening, providing some support for the current housing market.
An inevitable interest rate hike may slow down the housing market, making now a great time to buy. Still there is plenty of evidence that the current market is far more sustainable than in the mid-2000s.
The bottom line: “The red flags are not evident in the current housing recovery,” the San Francisco researchers in the Bloomberg story wrote.
Of course, vigilance is always the key. And every buyer and seller needs to make a prudent decision based on market factors and their own economic circumstances.
To learn more about the Bend market, get started with listing your Bend home, or to view area homes contact me call (541) 383-1426, or visit Bend Property Search to connect with me through my website.