Does anyone remember the real estate bubble from 2005-2008? An interesting phenomenon played out during that period. Prices continued rising while months supply of housing inventory increased as well. How did that happen? In a word or phrase actually, irrational exuberance – the unfounded market optimism that lacks a real foundation of fundamental valuation, but instead rests on psychological factors. The term was coined by Robert Schiller, of the Case-Schiller Index, and a fellow at the Yale School of Management’s International Center for Finance.

During the previous housing bubble, supply continued to stack up while demand decreased, and somehow prices continued to rise. Mortgage loans were very easy to come by. Probably as much as 8X easier to obtain compared to today. The common industry joke during the mid-2000’s housing bubble was if you could fog a mirror you could get a loan. 

How is this real estate boom cycle so different? The demand you are seeing in the housing market today is real. Sincere demand is gripping the suburbs due to COVID, work from home initiatives, and historically low mortgage rates. Add all of this to the fact that housing inventory is at an all-time low and we have a very real law of supply and demand playing out in front of our eyes. High demand coupled with low supply equates to rising prices. For the buyers that are in the marketplace today, multiple offers are the norm for attractive properties in many markets across the country. 

How should buyers navigate this competitive market? When your agent submits your offer, an accompanying letter as to who you are and why you are wanting the home may help immensely. There are stories of sellers accepting lower-priced offers (within reason) from a family that they felt truly wanted, perhaps needed, their home as opposed to an investor or another family that was not as transparent. While this tactic is not that unusual, it has not surfaced with as much regularity as we are seeing today. 

These times are when having a sophisticated real estate agent in your corner can pay big dividends. The more you learn about the seller (your agent would help here based on their relationship with the listing agent) the better positioned your offer should be. 

Is it competitive out there? You bet. Is it a real estate bubble? No. 

Happy home hunting!