Real Estate Bubble 2.0 on the Way?

Not even a decade ago, the United States economy suffered the worst financial disaster since the great depression. At the center was a real estate bubble driving prices sky high, increasing consumer debt, and causing upside down mortgages and unmanageable debt payments for borrowers.

The cleanup of that mess is behind us, and lenders are back at it giving large sums of money to new buyers unaware of some of the intricacies of adjustable rate, interest only, and balloon payments that their mortgages may include.

One party at the center of anything real estate related is the industry of real estate agents. In hot markets, agents are playing the same games as the last time we saw housing prices go on a roller coaster ride up and back down.

One popular tactic is under-pricing a home to draw in more bidders, and it is working. In an example from the LA Times, a home was listed at $479,000 in a $495,000 market. The home drew in extra attention as the home was in the budget, and search results, of many more shoppers. A bidding war ensued and the $495,000 home went for $550,000, well over estimated market value.

Other tactics including escalation clauses and contingency-free offers are supporting bidding up on homes even more.

While driving home prices up for clients is doing their job and putting their client’s interest first, it may be setting us up for the next real estate bubble and the market crash that comes along with it.

Read more from the LA Times.

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