QOTD:  Do you think we are in a housing bubble?  Why or why not?

Recently, I had the question asked to me if I can talk about the "bubble" we are in...  The reference was to another housing bubble if you somehow did not know what bubble I was talking about.

So for those of you who don't know me, I am Torey Howarth and I help you connect the dots between what you think you know and what you need to know to be successful in today's real estate market.

The backstory here is the Philadelphia real estate market is hot right now.  Prices have been rising, inventory is low, days on market are reduced.  Bidding wars are a norm.  The post 2008 response to this is "we are in a bubble", and to that I say:  Bull***t.  Why do I think this way?  Its what the research and constantly examining the markets tells you.

The 2008 bubble was essentially caused by an in-organic bolstering of the housing market as a result of lenders providing non-creditworthy / unqualified borrowers loans so they can buy houses they can not afford.  When the pulse of the market changed, so did the interest rates on people's adjustable rate mortgages which ultimately let these borrowers into foreclosure.  The key take away here is it was inorganically stimulated by short sighted greed on everyone's behalf.

Flash forward to now, the markets are different.  Lending standards have loosened dramatically from a few years ago but the basic underwriting principles remain fundamentally sound.  People are getting low LTV's only when they can afford to.

Philadelphia is experiencing a great deal of growth as a result of being under a magnifying glass by a national and global audience.  For a large city, Philadelphia's cost of living is extremely low.  A recent study suggested it was the 2nd most undervalued city in the US (by far too).  This large scale is seeing the investment potential of the city.  In addition to the increased interest from other regions, Philadelphia's core economies are fundamentally strong.  37% of jobs in the city right now come from the education and medical industries of Center City & University City.  Innovation is at an all time high at the universities signaling a strong future.  Over 117,000 students are currently enrolled in higher education across the city while we are experiencing 64% of those students staying in the area after graduating.

The critical key everyone is talking about is public schools.  More babies than ever are being born in the Center City area with an increase in attendance at greater center city public schools.  More importantly than what has happened is what is happening.  Parents are now recognizing they can change they school system by leaving their own mark, and are doing just that to uproot change to a broken system.

At the end of the day, the center city and university city markets are strong with a stronger future outlook. This will have a profound impact on all of greater center city and the region as a whole.  I am not saying this because it sounds good, but it is just what it is.

The only concerns I see in the real estate markets are centered around the non-core neighborhoods; specifically those that grew at a disproportional pace to the development of the entire community.  That being said, the outlook is not bleak there unless your investment strategy is under 5 years or so.  As always when you play the short game, you run the risk of being the one left holding the bag.  Knowledge is power.

PS:  For those of you who watched my Q1 market update in February, I called the spring market 3 months before Philly.com wrote about the same things.  Would you rather know things before they are happening or once it is too late?

NOTABLE SOURCES:

Center City District - www.centercityphila.org/

University City District - http://www.universitycity.org/

Undervalued City List - http://goo.gl/t0512s  

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Torey Howarth knows & sells real estate.  During years of trial and tribulation in pursuit of entrepreneurial success, things were not always "right", but they are now...

As a millennial playing in the washed-up sport of real estate, Torey found his niche and continues to relentlessly exploit it for all its worth.  He has 1 goal in mind:  Making dreams become reality (Don't discount his hustle and dedication to get there).

#ClosingTalk is a weekly off-the-cuff show (released Tuesdays @ approx. 3PM) that feature's Torey educating you on all things Philadelphia real estate.  No BS, just value and insight.  Because you earned it.

Torey'sThoughts is a weekly show (released Fridays @ approx. 3PM) focusing on anything but real estate.

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