Dorota Dyman & Associates Real Estate Ask Adam: Are We in a Real Estate Bubble?

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Dorota Dyman AssociatesREAL ESTATE
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Dorota Dyman Associates Real EstateAsk Adam
Are We in a Real Estate Bubble?

• Im certainly not an economist by any stretch,
  but I can share my personal thought based on my
  professional experience as an Arlington real
  estate broker.
• I think we can all agree that real estate home
  values have been rising throughout 2013.
• RBI is reporting that the median price of sold
  homes in Arlington is up 6 from this time last
  year.
• The Case-Shiller index reports a 7 home price
  increase for the Washington DC area over the last
  12 months.

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• Dorota Dyman Associates Real Estate
• Buyer activity has increased in 2013. Some of
  this is due to a release of pent up demand from
  would-be homebuyers that have been waiting on the
  sidelines for the real estate market to stabilize
  or the price of their current home to reach a
  point where they could afford to sell and buy
  something that fit their current needs.
•  
• Another factor leading to an increase in prices
  is the low supply of housing inventory. New home
  development is still in hibernation. The rental
  market has been strong enough that many would-be
  home sellers are opting to rent their homes
  rather than sell them because of the favorable
  rental income they can generate.

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Dorota Dyman Associates Real Estate

• Other homeowners are either happy where they are
  or have not seen the value of their homes reach a
  point where they are motivated to sell.
• So if prices are rising, does that mean we are in
  a bubble? No, but having been through the
  bursting bubble of 2006/2007 we are all on high
  alert. I would even go so far as to say that some
  of us have been conditioned to feel that
  increasing prices will inevitably lead to a
  housing market bubble.
• Looking back at what happened leading up to 2006
  prices were rising at a much faster speed. You
  may remember zip codes in Arlington experiencing
  greater than 20 appreciation in 2003 and 2004.
  Prices are rising again, but at more reasonable
  pace.

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Dorota Dyman Associates Real Estate

• Youll also remember the infamous mortgages that
  people were obtaining, which they would never
  qualify for under the current standards. Todays
  growth is happening on a more stable base of
  financing where homebuyers are bringing equity to
  the closing table and having to meet higher
  standards for qualification.
• Looking forward to 2014, I do expect buyer demand
  to taper somewhat. This will be due to an easing
  of the pent up demand I described earlier and an
  increase in the cost to own due to higher prices
  and higher interest rates. There are two other
  important factors to keep an eye on that can
  affect the real estate market

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Dorota Dyman Associates Real Estate The
local job market. Economists and politicians are
warning that the local job market may soften as
the federal government begins to shrink. I expect
the amount that the real estate market is
affected will be in direct proportion to how deep
and abrupt job cuts are.   I expect that interest
rates will continue to climb. I think that the
market will be able to absorb rate hikes into the
5s, but if we start talking about 6 or higher,
then I expect them to adversely affect the real
estate market. Its a polarizing subject to say
the least so I am looking forward to hearing your
thoughts on the matter in comments.