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Is Boston’s Housing Market in a Bubble?

August 2nd, 2017 |

A housing bubble is a term used to describe a temporary real estate condition which sees the prices of homes rise to above-average norms. We all heard the term a lot in 2007, when the housing bubble which had been building for several years suddenly “burst” and people were left with homes that weren’t worth what they paid for them, leaving them “upside down” — owing more than they could sell their homes for.

What Causes a Housing Bubble?

It’s not one particular thing which causes a housing bubble — it’s many. High demand can cause the prices of available homes to rise. So can speculation and over-zealous, risky investing. Unfortunately, when the bubble gets too big, it’s bound to “pop” just as an actual soap-bubble or a balloon pops when it gets to large. This often leads to a high rate of foreclosures, a situation that persisted for years following the housing bubble of 2007, when literally millions of Americans lost their homes and had their financial lives turned upside-down.

What About the Boston Real Estate Market?

Is Boston’s housing market currently in a bubble? Some experts believe that it is. According to real estate analysis site, Boston Bubble, real estate in the Greater Boston area has been in a bubble “for the last several years”. Although they acknowledge that prices are starting to come down, they maintain that they are still “abnormally high” when compared to historical market data for the region.

How to Protect Yourself from the Effects of a Burst Housing Bubble

If you’re thinking of buying or renting in the Greater Boston area, how can you avoid being “caught” in the often devastating aftermath of a housing bubble that could burst at any time? Follow the commonsense rule of refusing to borrow more than you feel comfortable spending. And if you find yourself being pressured by a real estate agent or a lender to spend outside your comfort zone, run, don’t walk out of their office and find someone you can trust!

RH Blanchard is an expert in the greater Boston rental and investment property market with years of experience in property management and general contracting. When you’re ready to tackle a home renovation — whether it’s a single room or a whole-house project, contact us for affordable pricing and superior service!