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So, are we in a bubble? My answer is no. Back in 2006 and 2007, 42% of investor purchases were new construction. Right now, less that 2% of investor purchases are new construction. In the previous bubble, investors were buying new construction and banking on appreciation. Today, investors are buying properties that need to be fixed up, so they are building equity instead of banking on appreciation.
The next thing I would like to point out is availability of credit. Our government went from one extreme to the other. Before, anyone could get a loan; even people who were deceased were approved for loans. Now, there is a lot more criteria that has to be met. While I'm not 100% sure I like how tough the criteria is, it is definitely keeping people who shouldn't be buying homes from buying them, therefore reducing the risk of default.
In addition, Portland and Southwest Washington is the number one relocation market in the country. Our population growth continues to get better. Why? Liveability. In Money magazine, Portland was listed as the number one business area for telecommuters. If people want to work from home, they move to Oregon.
Even with our growth, we are still the cheapest West Coast city to live in. With liveability, population growth, and affordability, we are not getting close to a bubble. Appreciation will slow down, and I predict we will be back in a normal 3%-4% growth rate for the next four years.
If you have any questions about today's topic, or about real estate in general, please give me a call or send me an email. I'd love to help you!
