Philadelphia Real Estate Blog


Tredyffrin-Easttown Housing Bubble? – Here is the First Sign.

This is the first in a series of articles that will examine the facts that contribute to the solid growth in Tredyffrin-Easttown real estate values, the problems associated with areas that seem similar but do not have the same growth, the talk of another impending bubble, and other information that can help you make your own conclusions on the subject. Even if you do not get a definite answer, you will be more informed and be able to make better real estate decisions.

In today’s real estate market people are more cautious, in the early 2000’s the presumption was houses prices will always rise. This was supported by a stretch of steady increases that were only briefly interrupted by localized losses in specific areas; these losses were short and non-threatening. Many people do not realize this, but before 2006 there was not a national decline in housing since the depression era of the 1930’s. People think the early 1990’s might have been slow or the 1970’s with the oil crisis, but nothing was national, as widespread, and all-encompassing as the bubble bust of the last decade.

The problem was that even the experts who are also referred to as “regulators” did nothing to deflate the bubble. The market regulators, along with everyone else accepted the idea that values would continue to rise. Of course this all seems ridiculous now, hindsight is always perfect, but have we learned from the past? But more importantly, how does this relate to Tredyffrin-Easttown real estate prices?

“…market regulators, along with everyone else accepted the idea that values would continue to rise.”

Houses prices declined between 2006 and 2012. Since the turnaround or the “bottom”, around 2012, prices have generally been growing, with steady increases in some areas and high increases in other areas. How high do you say? Good question. Because the answer might scare you; prices are higher in some areas now compared to the bubble time of 2006. Now do you see why a new bubble could be just around the corner?

Now don’t go selling your house just yet. We as a country and they as the market regulators have both learned from the past. But unfortunately most people have short memories. Even more unfortunate, the “masses” have even shorter memories. So again, how does this affect home prices in my area? One phrase that we throw around that has meaning in most areas is “a neighborhood ceiling”. It can be described in different terminology, but the definition is the same. Communities and more specifically neighborhoods have ceilings. You can overbuild, you can over renovate, and you can over pay, but you cannot undo any of those things without losing money.

So the first thing to look at in the area you are buying, is the maximum value that could be achieved in the time you are planning to live in that house. This might not be an easy answer, and this is where a qualified real estate agent comes into the picture. Always ask yourself: What can this house be worth or if you cannot answer that question, then ask a qualified professional like ourselves!