Hot Market: Bubble Or Not?

Unfortunately, the truth is we won’t know if it’s a bubble until much later down the road. Fortunately this market is different then the market ten years ago. Wow, time flies.

So what makes this different than 2005-2007?  Up until 2007 or so, if you could fog up a mirror, you could get a loan. There had a been a loan out there for self-employed types or others with variable but consistent income where they just needed to state their income if they had good enough credit. Many called these Liar Loans. This guy is likely the poster boy for how it went wrong.

Back in the early 90’s the Portland market had a surge like we are having now. It was actually that run up that helped launch the real estate career of Robert Kiyosaki, writer of Rich Dad Poor Dad. The market had just been undervalued and it caught up, and interest rates weren’t as good as they are now.

Match the Liar Loans with oddball loans where you can pick each month if you want to pay just the interest or not or get a great rate for two years and then get hammered after that, and you have a toxic mix. That mix led to banks swinging the pendulum the other way and seemingly no one could get a loan.

We had record foreclosures, falling prices, and no one able to get loans. That’s a death spiral. Even the cash investors sat out to see where it all landed.

Now the cash investors are back. Loan guidelines have eased, a bit. Maybe prices are just finding the new normal as we are still behind our top prices from 10 years ago.