Aliso Viejo Real Estate Bubble?

by keithwatts on December 18, 2014

in Buyers, How's The Market, Latest News, Sellers

Aliso Viejo Real Estate Bubble?

Is there a Real Estate Bubble in Aliso Viejo?  A Real Estate Bubble is defined as, “Rapid increases in real property value until they reach unsustainable levels”.   We definitely have rapid appreciation.  Home values rose as much as 30% in one year from late 2012 to late 2013.  This trend is undoubtedly fueling the bubble talk but, in order for it to be a bubble we would also need unsustainable levels.   In order to understand whether or not our rise is sustainable we should look at what got us here.

The perfect Aliso Viejo Real Estate Storm

It wasn’t one factor that led to our quick recovery in Real Estate, but rather a perfect storm.  In 2013 interest rates dropped below 4% which made the normally unattractive Real Estate marketplace much more attractive to buyers wanting to remain liquid.  With rates so low there was no longer an advantage to staying on the sidelines.  In other words, there was not a better place to put their money.  In Aliso Viejo 1 out of every 4 buyers in 2012-2013 were cash, make your house sale run smoothly by using my conveyancing specialist online when selling your home.  Another impact of low rates on the marketplace was the available money to consumers.  The average owner occupant had more money to play with.  Leverage drives real estate and giving people more buying power sped things along.  Buyers had urgency to get their purchase in place before rates changed.  The same time the flood gates opened up on 6 years of restrained demand.  Buyers were very uncertain about the Real Estate market from 2006 to 2012 but media reports of low rates, dwindling inventory, and rising prices paved the way for a classic Real Estate Run.

Do we have unsustainable appreciation in Aliso Viejo Home Values?

The answer is no.  We are unlikely to continue a rapid increase in home values because the storm has passed.  Rates have risen slightly and more importantly, demand has been satisfied.  The market leveled off in late 2014 but the landing was soft.  Recent appreciation gained is being sustained.

When taking a closer look at the previous burst it’s evident that loose lending practices, combined with speculative borrowing fueled the fire.  High leverage loans in both investors and owner occupants were widespread. Today lenders and borrowers are thoroughly screened and homes are purchased based on equity and repayment ability.

What is in the future for Aliso Viejo Real Estate?

Is it possible we are in for another run?  Interest rates have once again fallen below 4%.  Inventory in Aliso Viejo is now at 114 total homes, down 100 homes from just 90 days ago.  If you’re a homeowner I wouldn’t get too excited about another run.  The fact is we usually see inventory go down as the year ends and rates also fall towards the New Year.  Expect 2015 to be a resemblance of a traditional Aliso Viejo Real Estate market.  Main Street will drive this one not Wall Street.  Stay tuned next time for a deeper look into this subject.

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Post by Keith Watts

Keith has written 98 articles.

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