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Prices in Phoenix have been steadily going up for a year and a half now.  Phoenix leads the nation in percentage increase in property values at just under 20% over the last year.  Many are wondering, “Are we in another real estate bubble?”.  This is an understandable concern after what homeowners experienced when the last bubble burst.  But, the answer to this question is a resounding NO…we are not in another bubble and the market is not headed for another crash.  First, even though prices have steadily been increasing, they are still not anywhere near where they were at the height of the last bubble.  Second, rising prices alone does not create a bubble.  During the last boom, loose lending practices along with the rising prices was a large part of the huge crash we had.  Back in 2005 and 2006, lenders were granting loans to buyers at 103% loan to value with very little regulation.  103% loan to value!! This means not only did these buyers not put ANY money down on their loan, but their closing costs (upto 3% of their loan amount) were also paid for and rolled into the loan!  Today, lending requirements are much stricter.

If you are looking to buy but are worried that the market is headed for another burst of a bubble which would then lower prices, you do not need to worry.  One local expert even said that even if ALL the large investors who have been buying homes from the bottom of the market through now ALL put 100% of their homes on the market to take advantage of the increased prices at the same time, it would only add 10,000 to 11,000 more homes on the market.  When you add this to the current inventory levels, he says the market would still be undersupplied compared to demand.  If you’d like more information, see the two links below to two great articles on this topic.

http://www.azcentral.com/business/realestate/articles/20130610metro-phoenix-home-sale-prices-up-from-market-low.html

http://www.phoenixmag.com/lifestyle/valley-news/201306/inflated-expectations/

 

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