So, are we headed for another crash?
Most prognosticators are saying probably not. The specifics of this market are different. The major differences involve a very low inventory. In Burbank, the total available listings last February was 259. That is compared to 125 in February of this year. The number of active listings has been hovering between 50 and 60 for some time now.
In the previous market bubble, there were lots of contractors building as fast as they could. Right now, the contractors that survived are busy but not in the same way. Most agents will tell you that while construction activity is picking up, it is not even close to where it was. And it will take time for construction companies to grow and expand or new ones to start up.
However, there is cause for caution.
In the previous market the rise in prices was mainly speculation by consumers. People thought of their homes, not as a long term investment as much as they thought of it as a short term commodity to be bought and sold for a quick profit. With so many people being burned in the last market, most consumers are more cautious.
But the place to look may be equity firms and institutional investors. Blackstone Group, a private equity firm, has put 3.5 billion in the purchase of homes. It has also sought additional capital to the tune of 2.1 billion to further their purchases. Colony Capital is putting 2.2 billion into the housing market.
At some point, these companies will cash in on their investments. The only question is, when. When they achieve 10% profit, 20%, 30% or more? At some point they will sell. When that happens, much will depend on how many of these firms unload their investments. Interest rates too will play a role. And, not to be overlooked, banks are still sitting on some inventory.
So, is it housing bubble II? We very well may be at the beginning of another run up. But, if and when it will pop is the larger mystery. Time will tell. In the mean time, sellers can be happy that their equity is starting to go up. If sellers have been waiting to put their home on the market, now may be the time. Buyers need to understand that we are seeing multiple offers on almost every listing. So, they will need to be aggressive. Otherwise they will miss out.Please call or send an email if you need help with any of your real estate needs.
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