Are We Approaching A New Housing Bubble…

The new appraisal standards and regulations set in 2009, while still bemoaned by many of us, are an example of regulation put in place to thwart uncontrolled and unsupported appreciation rates that lead to unfounded bubbles.  While in my opinion still under-regulated, financial institutions have nonetheless returned to the sound mentality of NOT making NINJA (No Income, No Job or Asset) Loans… to be sold off to an unsuspecting investor population. Although, it would be nice to see congress put some teeth behind the idea of protecting the market from some of those acts, which lead to the Great Recession.

As to the fear of a new housing bubble… For the foreseeable future an annual appreciation rate of 4 – 4.5% should be expected for desirable markets. Realize that not all markets are equal. Some markets are still struggling… Some are growing at even stronger rates. That does not point to a bubble! But “Danger, Will Robinson”: Should we forget the lessons of the past, all bets are off.

Looking back at the past, it would seem that we may remember these lessons for 20 or 30 years or so… then amnesia or the belief that “this time will be different” seems to set in and we have to learn all over again.

That brings me to a pair of questions: What causes a bubble in any market? Over exuberance! What causes a bust? Fear!

We all have a role to play in preventing Bubbles and Busts. Fight over exuberance… Beware of greed… even when it is our own… Beware of Fear: It rarely leads to the best decision-making. But then I am a contrarian… I believe: When others are selling, it’s time to buy… When they are buying, it’s time to sell…

May the market be with you.

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