![]() Is the housing market setting up for a crash? 2 experts - including one who called the 2008 bubble burst - share the warning signs that a real-estate downfall is coming.Out-of-town homebuyers are driving up real-estate prices in these 10 overvalued cities, and it's fueling housing-bubble fears.Are we on the verge of a housing-bubble bust? An economist advises buyers to sit out the current 'irrational' market and lists the 11 most overvalued cities in the US.A chief economist who called the 2008 housing crisis warns that the US housing market is in the 'early stages of a substantial downshift' as demand subsides - and says surging home prices and rents are due to cool off in a big way.Read more Insider analysis on a possible housing bubble If the market declines, that would be another economic headwind among many for the US as it climbs out of the pandemic. ![]() Housing is also a driver of economic activity more broadly, with consumer spending usually rising when the housing market is strong. As houses are the among the largest sources of wealth for many Americans, a plunge in home prices could lead to a serious wealth destruction that could take people many years to build back up. While the result may not be as severe as the Great Recession that came after the 2008 housing bust, there would still be consequences. "The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring," Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, wrote in a research note. With the median US listing price sitting at an all-time high of $405,000, that may be unsustainable as buyers adjust to the prospect of higher monthly mortgage payments. While home builders are slowly increasing housing supply, the recent uptick in mortgage rates is likely to put additional pressure on affordability. "Given that interest rates are expected to increase, housing affordability will be under additional pressure in 2022." "Housing affordability fell to a decade-low during the third quarter of 2020," Robert Dietz, the SVP and chief economist of the National Association of Homebuilders, told Insider. The affordability crisis could lead to the bubble bursting housing market behavior for the first time since the boom of the early 2000s," the Fed researchers wrote. Last week, the Federal Reserve Bank of Dallas published a report suggesting that although the underlying causes of home price growth differ from those during the last housing boom, there is growing concern that US house prices are again becoming unhinged from fundamentals - meaning that buyers are increasingly purchasing homes out of the fear of missing out, rather than based on their fundamental value or their own ability to afford them in the long run. Account icon An icon in the shape of a person's head and shoulders.
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