Uh-oh, not again. Nearly a decade after the last major US housing market bubble popped, we may be nearing another. A housing market bubble is not easy to define, but generally is when prices and demand increase for houses, while supply begins to rise as demand lowers, resulting in lower prices and an eventual crash.
But according to most experts, the nation as a whole is not in a housing market bubble. Some areas, however, are more at risk than others. If you plan on investing in any of these areas, be aware of their market conditions. Research properly before you decide on an investment.
Florida is no stranger to the housing market bubble crash. Along with states like California and Nevada, it was severely impacted by the latest crash. It has tremendously recovered, however, due to a large amount of foreign investments. But recently, some areas in Florida are showing signs of a bubble. Miami and Miami Beach have seen a significant decrease in the number of homes sold. Flips have also contributed to the situation in South Florida. The Sunshine State is not in total despair, though. Other cities in Florida, like Orlando and Tampa, are projected to do very well for 2017.
One Texan city is in the bubble, Midland. Midland’s housing market has taken a hit as a result of cheaper oil prices. Other major cities and areas in Texas are somewhat near housing market bubble. Dallas and Austin have had their property prices reach new highs. Austin, in particular, might be nearing a bubble, as its market is 20% overvalued. Other Texan cities are overvalued at around 15%. In Houston, there has been a 53% increase in the number of vacant homes. Not all of the areas in Texas are struggling however, some are doing relatively well.
Related: 6 Real Estate Trends of 2017
The Boston metro area may be at a risk for a housing market bubble. Home prices have increased in 2015 and have slowed down during 2016. Normally, this would not do much damage in terms of a crash. But since Boston has had a low supply of housing for some time, these conditions could potentially sow the seeds for a market bubble.
As previously mentioned, California knows what it’s like to be in a housing market bubble. And during its recovery years, it still had very high home prices compared to the national level. Although the state at large and its areas are not in a bubble, there still is some cause for concern. For instance, in San Jose, the median home price is nearly ten times that of the median household income. Also, San Diego home prices have reached their highest for the first time in nine years. These incredibly high property prices are attributed to an overvalued housing market. Riverside, for example, is 17% overvalued. As it the condition has been for a while now, California’s housing market has been very suspect.
Related: The Best California Real Estate Markets: Affordable and Not So Affordable Areas
The home prices for single-family homes in Seattle has risen ridiculously. In the last five years, it has increased a whopping 74%. At one point in 2016, the median home price was over $650,000. Home construction has significantly reduced as well, with a record breaking low number of home building permits in May 2016. And as for the rest of the state, property prices have been soaring for the past year. Is it a bubble? Nobody is too sure at the moment, but it does gather some attention. Only time will tell how Seattle’s market plays out.
Reno, Nevada does not look in good shape. The city is at a staggering overvalued percentage at 23, making it one of the most overvalued housing markets in the country. In the beginning of 2016, home construction reached a record high. The problem is that home prices in the city have shot up as well. Poor supply for the right demand has been the main culprit of these high prices. With very low home affordability, Reno is on borderline with a housing market bubble.
Oregon has a huge blemish when it comes to its overall real estate market. It has an overvaluation percentage at 9%. That’s not all, a couple of cities in the state are very susceptible to a housing market bubble. Portland is known as one of the least affordable cities in the country. Adding to this mess is the fact that the median home price is about four times higher than the average household income. It’s normal for a market to have the median property prices three times the average household income. And although Portland’s is not sharply higher, like San Jose, CA, when coupled with the low affordability, a crash is possible to ensue. Another unfortunate case in Oregon is Bend. The city’s housing market is 20% overvalued. It is probably best to avoid the situation in most of Oregon.
Some cities in Tennessee are not looking too great. Nashville has been plagued with the highest number of home closings since the last housing market bubble. This has not stopped the massive home constructions going on there, though. This will only increase vacancies as time goes on. Memphis has also shown signs of trouble with its housing market as of late.
Related: Is it a Buyer’s Market or a Seller’s Market?
Hopefully we do not experience another impactful housing market bubble similar to that of almost a decade ago. While many areas have rebounded strongly from this misfortune, others are still trying to find their way out. The areas mentioned in this blog are those developing a bubble’s symptoms. If you ever decide to invest in any of these areas, make sure you have conducted proper research and have not taken a great risk.
Use Mashvisor to perform a city and property investment analysis so in order to make intelligent decisions backed by data.