Is there any validity to rumors that we are nationally on the verge of a burst real estate bubble?
Real estate experts Norm Miller, Hahn Chair of Real Estate Finance in the School of Business Administration’s Burnham-Moores Center for Real Estate at the University of San Diego (USD), Michael Sklarz, president of Collateral Analytics and Jim Follain, senior vice president for research and development at Collateral Analytics recently conducted a study to tackle that question and refute any doubt about the security of the housing market. They polled numerous neighborhoods and zip codes to answer the question, “Is a new home price bubble forming?”
Their response? “Our analysis based on a number of approaches we have used over the years to identify home price bubbles is that we are far from bubble territory on a national or metropolitan level and that anyone claiming otherwise is looking to sensationalize an issue which does not exist,” said Norm Miller
He warns against liberally using the term bubble stating, “[A] reason why we do not use the term ‘price bubble’ freely is that real ones are very infrequent. Examples of real bubbles include, stock prices in 1929, 1987, and NASDAQ stocks in 2000, gold and silver in 1980, Japanese land and real estate prices in 1989-90, and, of course, home prices in the U.S. in 2005- 2007. Based on these rare examples, it is reasonable to say that true bubbles only occur on average once in a generation.”
The experts’ research did point out, however, that certain markets are at various levels of unsustainability and 7 are more at risk that any others:
- Miami, FL
- Denver, CO
- Portland, OR
- San Diego, CA
- Oakland/Berkeley, CA
- San Francisco, CA
- San Rafael, CA
This unsustainability they say is largely credited to an area’s industry being volatile, reliant on tech capital, or recently successful startups.