Tom Hoban

Tom Hoban

Are we in another housing bubble?

The Puget Sound real estate market is about as healthy as it’s been since the crash of 2008-09.

The question on minds today is, will it last or is this another bubble that might burst?

The answer depends on who you talk to and what category you’re talking about.

Some forecasters are concerned about the ratio of the cost of housing in the Puget Sound area to income levels.

There are areas of the country where wages are rising and keeping pace with increasing rents, but for most Americans today their buying power is unchanged since the crash and now they are facing increased housing costs in a supply-constrained market.

This is particularly pronounced in the Puget Sound region.

There is growing concern that if the cost of housing out-paces income, demand will drop off.

Lots of attention is being paid to this widening housing cost-to-income gap since it was a contributor to the last bubble burst.

Downtown Everett office and retail rents took a dive after the crash as well, dropping as much as 30 percent from their pre-crash levels.

Unfortunately, unlike housing, office and retail has not recovered to their pre-crash levels, leaving many investors and landlords still licking wounds.

Most healthy central business districts have a large private sector employer in them. Downtown Everett does not, leaving mostly government, nonprofits and professional services to fill space.

Those categories do not drive enough demand on their own to support the level of inventory in that submarket.

The trend line is favorable, though. Just lagging behind other categories.

Home builders point to limited land inventory as a new reality in the Puget Sound, choking supply at the same time demand is high.

Unique to the market today is a wave of aggressive buyers from China trying to get their cash into real estate and other hard asset classes in the U.S.

To the south of us, King County, in particular, is feeling the effect as domestic buyers complain about being out-bid by foreign nationals in a housing market that is already way under-supplied.

Jobs drive everything in the real estate game, of course.

Real estate is simply shelter for us at home or at work and can only have a role in the economy if there is reason for people to live and work there.

Changes in the Chinese economy and easing of interest rates by the Fed are two areas to pay close attention in the upcoming months and years to forecasting how long this current market will remain in this condition.

Changes to both could trigger changes in demand and allow supply in the pipeline today to catch up.

Tom Hoban is CEO of The Coast Group of Companies. Contact him at 425-339-3638 or or visit Twitter: @Tom_P_Hoban.

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