Overvalued Real Estate Versus the Bubble

Housing Bubble

On September 15, 2015, Diana Olick (@DianaOlick) posted an article on the CNBC website regarding overvalued real estate versus a housing bubble.  According to Sam Khater, CoreLogic’s deputy chief economist, overvalued homes are priced high relative to average incomes in the area.  However, there are good fundamental reasons for the high prices, such as high demand and low inventory.

We all know about the housing bubble that occurred back in the early 2000’s, and that the free and easy mortgage credit was the driving force behind it.  The lack of market fundamentals caused the bubble to bursts and home values crashed.  This is absolutely not the case in today’s market.  The prices are high, but lenders are far more strict with regard to credit.  Furthermore, there is no question that the demand for homes is quite high and the inventory is weak.

This is apparent to me as I continue to see prices increase when new East Boca Raton homes hit the market.  Sellers are well aware that there house is in high demand and options are limited.  There is no bubble to burst in this scenario.

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