So, you’re thinking of buying or selling real estate, but have heard about this “bubble” everyone warns of… but what is a housing bubble anyway? Simply put, a housing bubble is a situation where real estate has been on an often steep rise for so long that it’s no longer affordable for most homebuyers, and experts begin to predict it will eventually take a downturn or even crash. Whether it will slow down, crash or even downturn is not possible to accurately predict, it’s only possibly to speculate and confirm it when (…or if) the downturn event happens. How do you know when one will happen? Despite what you can read from often divided expert opinions, nobody truly can tell you when it will happen, if it will at all, until it happens. Experts say things like “if you’ve seen one, you’ve seen them all,” but there are many factors involved and data that can be open to interpretation, so take everything you read, even this, with a grain of saly. Ultimately, it’s up to the individual buyer or seller to determine whether they’re making a sound decision to participate in the market at any time.
Remember, the bubble is a situation of hype in a specific market that leads to it being overvalued, but the timing of this occurrence is not known until after the fact – as in when it is happening or after it’s happened. If you rely on theories you read on the internet instead of your own financial situation and ability/interest in buying or selling, you may be missing out. For example, some say that a housing bubble will burst every 13 years on average… but that can’t be proven in today’s market until what…? Until it happens. Some experts still predict that despite the contrary theories, the housing market will continue to soar through this year.
So how do you decide what to do? Local market conditions matter too, but more than anything, your personal situation should dictate your decision. If you have plenty of equity in your home now and are ok with possibly selling now and losing out on the higher profits you could get by waiting another year, then explore your options. The right time to sell is the time that is right for you. Same can be said for buying. If you are interested in waiting longer for prices to come down, or the bubble to pop, then know that nobody can tell you when that will be, but if you’re on no real timeline or unsure about where you want to live, then that could be your best move. However, it is not certain that every bubble will pop and as such, your best bet could be to get in where you can either to sell at the high point, or buy in before prices rise more.
But what if you don’t want to buy at the top of the market? Well, who is saying it’s the top of the market? Does that person see into the future? If not, then it’s pure speculation yet again, and it’s possible you could be left with more equity in months after buying at what others may deem the top. Even if you do feel like you’re possibly buying at the top of the market, just knowing that a home is a long term wealth-building asset that you pay down over time. With each payment toward your principal loan balance, your asset is more valuable through increased equity. Furthermore, with each year of the bubble increasing your home’s value, your wealth is growing from the increased value while also growing from owing less on your mortgage.
The verdict? Just buy when you’re ready and feel that it’s right for you instinctually. In theory, unless you feel strongly that the bubble will pop and your market will crash considerably, chances are buying a home when you’re otherwise ready “are you ready to buy a home” could mean that even if it did pop, you’re not going to be upside down in your home for long, if at all. If you plan to own the home for more than 10 years, which most people do, then you can almost guarantee a positive outcome presuming you’re buying a good amount of home relative to your income and expenses. You can follow the expert predictions for a while during your decision time, but remember that it really comes down to Another important question to leave you with is this: “How to know you’re getting a good deal?” We address that question in this blog post.
Having the right Realtor at your side through the process is also a great way to be sure that you’re able to have confidence in the buying process. If you’re looking to buy, sell or invest in the Tulsa area or Northeast Oklahoma, I’d love to serve you. Having me represent you as a buyer is completely free! You can reach me here and set up to jump on a phone or Zoom call!