Is there a housing bubble in the Myrtle beach, real estate market? Hmm.
Thanks for stopping in my name is Lance MacMillan. I am here to help you learn more about the Myrtle beach real estate market, and hopefully keep you entertained in the process. I’m a licensed realtor with mango homes powered by Keller Williams, Myrtle beach. And today we’re gonna answer that question. Is there a housing bubble in the Myrtle beach real estate market? First, we’re gonna look at what a housing bubble is. Then we’re gonna compare our current situation to the last housing bubble that blew up in 2008. We’ll compare and contrast. And then we’ll be able to judge whether we are indeed in the middle of a housing bubble here in Myrtle beach. First off, what is a price bubble? The price of anything, including Myrtle beach real estate is determined by supply and demand. A price bubble is what happens. And there are outside influences that falsely tilt that supply and demand scale towards higher prices.
It could be outside influences reducing the supply of said thing. It could be an outside influence increasing the demand of said thing, or it could be both. But the whole point is that those outside influences are false influences. They have nothing really to do with the commodity itself. You end up with an artificially high price and when that artificially high price corrects itself and the price drops down, all of a sudden, that’s the term that you get. When you say price, bubble, pop price, bubbles can happen with anything. Now let’s look at collectibles. What about beanie babies? Remember those when they first came out, everybody and their mother was stampeding to the store to try to buy these things and external factor, a factor known as FOMO. That’s what marketers call it. Fear of missing out, had artificially inflated the demand of these little toys, because that demand decreased the supply because everybody was buying the things.
It turned into a big snowball. And pretty soon you couldn’t find one of these these things in a store to save your life. And because nobody wanted to miss out on the craze, it just drove prices higher and higher and higher and higher, and then made people want them more and more and more and more. I want you to think about it though. Did anything actually change about the little toy? No. It was a cute little toy. It was worth five, 10 bucks. Did anything change? Was there any functionality at it? Did it somehow become a better or more distinctive toy because everybody wanted it?
No,
It was a false demand. And because of that false demand, sometimes you had to go to eBay to get one of these things than if you was the one that you wanted. Sometimes you’d be paying 5,000 bucks, maybe more for these things, all for $5 stuffy. When people realized, Hey, these things are cute, but they ain’t $150 cute
Things came back to normal. Now the people who bought those beanie babies, the ones who had to have every single one in their little collection, when they were buying these things at their highest prices, they lost a fair amount of money. And yeah, you can go online right now. In fact, I did, you can go online right now and there are certain super rare ones that still fetch a decent price. But for the most part, the people that went all in on these things, when the prices were too high, they lost money. They lost it. Pretty good too.
That is a price bubble. Supply is artificially too low. Demand is artificially, too high prices are way outta whack. And then once everybody figures out, what’s going on and things get boom prices drop. And God forbid, if you bought when prices were too high, now, you know how that works. Imagine if instead of talking about, we need the Wiener dog, we were talking about real estate, just like fear of missing out, messed up the market prices for beanie babies. The same thing happened with real estate in the decade leading up to 2008. And that led to the biggest housing crash in modern times. So let’s compare the summer of 2008 with today, the spring of 2022. Let’s see if there are any similarities that way we can judge, if we are in the middle of a housing bubble right now. So supply and demand, determined price, right?
Let’s look at the supply side and the demand side of the equation between then and now first supply coming off of an economic downturn in the mid in 1990s, the us government wanted to grow the economy. They knew that the singular act of a person buying a home was the greatest boost that one person could have while driving the economy. So they thought it would be a good idea to get millions, more people to go buy houses. I am the federal government and I believe it would be a good idea for millions, more people to buy houses. What do you say banking world then the guys on wall street said, uh, I don’t think it’s a good idea. I, I, I don’t think it’s a good idea. Look, rates are gonna be higher. There’s gonna be more foreclosures. We lose money. People go bankrupt. There’s no good in any of this than the federal government said, we hear you.
We feel your pain. What if we guaranteed you against losses? If you just wrote a little more business to some of these people that aren’t good credit risks. So then wall street turned around and said, if you are gonna guarantee us against losses, I mean, why wouldn’t we? And that’s how the subprime mortgage crisis started out. You fast forward 10 years to 2007, right before the crash, the government loving the hot economy that they’ve created with this false housing, boom has the bank’s writing loans to virtually anybody with a pulse. This has artificially depleted the supply of homes that there was to sell builders. At this point, they literally can’t keep up the housing supply in 2007 is low, but it’s artificially low. It’s low only because there are buyers out there buying who have no business buying. I guess nobody in the federal government heard the phrase, the road de hell is paved with good intentions.
So now let’s compare this to the current Myrtle beach real estate market in spring of 2022. Are there any artificial forces that are affecting our supply? First off, our housing supply right now is low. We don’t have a lot of homes to sell. And it’s about at the same level as it was leading up to that housing crash in 2008. So what’s causing this. You might be tempted to say that the crazy low interest rates that we’ve had for the past couple years have contributed to this. I want you to think about it though. The buyers that were getting those incredibly awesome in interest rates, which they were down in the twos at one point, those were real qualified buyers. If the rates were higher, they’d still be qualified. Yeah. The rates probably enabled them to get a little bit better of a house than they would’ve otherwise.
But those same people would’ve roughly bought the same houses. Currently. There is no huge subprime market driving real estate. Like it was leading up to the housing crash in 2008, we have good buyers getting great rates. So that’s not the same as it was before. One thing we do have now that they didn’t have back then is the supply chain issue. Builders are having problems, finishing the houses that they started because maybe they don’t have enough windows or enough doors to finish the job. And that is slowing them down. Honestly, though, while it’s slowing them down, it’s not preventing them from building houses. It’s just dragging it out a little bit longer. And while this is having a small effect on the supply, it’s not killing it. The same goes for skilled labor that they use like electricians and carpenters. They’re a little bit shorthanded and it is slowing them down a little bit, but it’s not stopping them. Our housing supply is short here in Myrtle beach, but it’s legitimately short. There are real, tangible things that are limiting our supply of homes to sell here in Myrtle beach, unlike in 2007, before the real estate crash, at least on the supply side of things, there isn’t anything false. There isn’t anything artificial that’s limiting our supply that would contribute to a housing bubble, but let’s look at demand.
Looking at demand, running up to the real estate crash in 2008 demand was at a record high. Why again, it’s because the federal government enabled the banks to lend the people that they shouldn’t have been lending to in the first place. And this created callous demand for homes that ridiculous demand was driving prices so high, that it was actually creating its own supply shortage. On the other side of the scale that we talked about, I can’t overstate how crazy it was back then, but that was then, and then is not now our demand here in the spring of 2022 is far more organic. It’s far more real urban decay and crime are driving people out of the big cities who have the means to relocate young tech savvy professionals have learned because of COVID that they can work from home just fine. And home can be really anywhere they want. As long as it’s got a good internet connection, kind of like here, but, um, I’m not young.
The mortgage market, at least this time is structurally sound and free of any and all shenanigans and right along with everything else. And just as powerful, this is Myrtle beach who wouldn’t wanna live here. None of those factors are artificial. None of those factors are temporary. All of those factors are driving demand in a release sound way. And none of that is gonna change anytime soon. Our one wild card is inflation. Inflation brings higher interest rates. Those higher interest rates will suppress demand. Higher rates make a given house more expensive to buy. And if rates cross a certain threshold, if they start to hit double digits, that’s gonna price some of the first time buyers and the lower end of the market. It’s gonna price them right out. The more rates rise, the lower demand will dip the lower demand dips. The lower prices will start to go on the homes that we’re buying.
But here’s the thing. Think about this. They say that all real estate is local for a reason. Most of the buyers, the lions share of the buyers here in Myrtle beach are retirees. A lot of these retirees come with big savings accounts and vast amounts of capital from having cashed out in the city that they’re leaving because they are less reliant on a bank to get a mortgage for the house that they want higher rates. It’s not gonna hurt them as much. So at least here in the Myrtle beach, real estate market, our buyers, aren’t going to feel the pinch of higher interest rates as badly as they would in other P places, in other parts of the country. So to wrap up the demand side of things, our current demand is high and that’s not gonna change. Not in the short run. Anyway, all of our demand is real.
It is solid. It’s not artificial. It’s not transitory inflation will raise risk rates. Those higher rates will suppress demand. And that will suppress housing prizes here in the Myrtle beach real estate market. But our demand is real. There is no artificial demand. Like there was in 2008 and I don’t see the demand side contributing to a housing bubble. So let’s finish this up. Is there a housing bubble ready to pop in the Myrtle beach real estate market on the supply side of the equation, there is a shortage of homes, but it’s a legitimate shortage of homes. Local builders are having a problem catching up with demand, but that’ll iron itself out in the long run. Ironically, the higher interest rates are gonna help with that on the demand side, demand is high and it’s high for a lot of really good reasons. None of those good reasons are gonna change in the short run and rising interest rates stemming from inflation will suppress demand to an extent, but it won’t negate all of the other good reasons.
Why demand is there in the first place, our 2022 supply and demand in contrast with what happened in 2007 and 2008 is solid and structurally valid. The beanie baby market suffered under the fear of missing out the real estate market in 2008 was polluted with unqualified buyers. And here in 2022, we don’t have any of those problems. The Myrtle beach real estate market in 2022 is fundamentally solid and we don’t have a pricing bubble in my opinion. It’s just not there. There’s no reason for it. Am I right? Am I wrong? Let me know when the comment below. Thank you for watching. I hope you were informed. I hope you were entertained. And remember whether you’re buying or selling go mango.