Sustainable Trends

by Coldwell Banker Evergreen Olympic Realty, Inc. on August 12, 2015

ys7fviwz2dwr_FB_UrbanHomeWith all the good real estate news we are frequently asked whether this run is sustainable. While we wish we could predict the future, it is impossible to know for sure.

What we can say is that there are some fundamental differences between this current trend and the last run-up that resulted in an unprecedented downturn.

First, lenders simply are not giving loans to unqualified buyers. The last run up had easy loans given to people who could not afford them.  That led to an artificial boost in demand, which blasted the market to unsustainable heights. Today, lenders are required to confirm information about a buyer’s ability to pay a loan – obviously a welcomed return to common sense.

Second, last time national builders rushed into the market to meet the bloated demand.  By the time all the new lots and homes came to market, the phoniness of the lending came to light. That left a lot of property for sale and very few buyers. This was the recipe for the crash. Today, builders are nowhere near the pace of creating new communities. That keeps supply in better balance to real demand.

Third, even with the huge improvement in our market over the past three years, price gains this time around have been more in line with reasonable historic patterns. From 2004-2006, gains were 12%, 21% and 12%, respectively. This simply was not sustainable. Prior to that time price gains averaged 5.9% per year. We are now back to that healthier trend.

The big increase in demand today is the result of many homebuyers waiting on the sidelines for years while the market bottomed and confidence in the greater economy resumed. Even with the current record pace of sales, we expect the pent-up demand to take another few years to fully unleash.  After that, we hope to be back to our consistent, not crazy, upward movement.

Leave a Comment

Previous post:

Next post: