![]() Still, many of those who rang alarm bells last time don’t think we’re in for a repeat of the catastrophic bursting of the bubble this time around. It’s enough to cause PTSD, or at least déjà vu, among those who lived through the last housing bubble. Goldman Sachs forecast earlier this month that prices would rise another 16% by the end of 2022.īelief is that prices won’t crash this time It sees 13.6% growth from September 2021 through September of 2022, a faster pace of increase than its previous forecast. Zillow projects that national home price increases will slow but not start to decline. And by just about every measure, housing affordability has plunged, even as near-record-low mortgage interest rates has kept home payments in check.Īnd yet economists forecast even more price increases ahead. Home values stand at one third more than the peak of the last bubble in early 2007, Case-Shiller reports. The median price of existing homes now stands at $352,800, according to the National Association of Realtors. Year-over-year prices increases now stand at 19.9%. The US housing market blew past that mark in April of this year, with a new record set every month since. The previous record for rising home prices was a 14.4% year-over-year gain in the fall of 2005, according to Case-Shiller. Housing prices are rising faster, higher than during the bubble ![]() Have people learned their lesson? Maybe not. ![]() By February 2007 home prices would start to decline, losing 26% of their value before bottoming out, according to the widely followed S&P CoreLogic Case-Shiller national home price index. Still, economists believed the rising pace of home ownership meant that there was an nearly endless supply of buyers who would be able and willing to pay, despite surging home prices.īut, of course, the price increases did end. Wall Street firms and banks rushed to buy those securities.Ī building boom in the early years of this century helped to feed swelling home inventories and high vacancy rates. “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels,” he said in congressional testimony on June 9, 2005.Ĭredit-rating agencies gave top scores to mortgage-backed securities – assets backed by the payments due on home loans with questionable underwriting rules.Įconomists and investors widely believed that the questionable lending practices would be covered by the rising home values, allowing borrowers to sell the homes at a profit and pay off the loan if they couldn’t afford the payments. Instead, he said America had a large number of small bubbles in some home markets scattered around the country. The bad news is that practically no one was worried about the housing bubble in 2007, either.įormer Federal Reserve Chairman Alan Greenspan famously insisted in 2005 that there was no bubble. The good news is that few economists believe that the current run-up in housing prices is a bubble that’s about to burst, taking the economy down with it. Their attention is on other factors dogging the economy, such as a labor shortage, decades-high inflation, supply chain disruptions and of course the ongoing pandemic, which has been at least partly the cause of all of those problems. Most economists and investors aren’t focused on the housing market right now. It produced massive, prolonged unemployment and the greatest destruction of household wealth in the nation’s history. That led to the Great Recession, the biggest body blow that the US economy has suffered since the Great Depression. That’s the current state of America’s housing market, but it could also describe the US housing bubble that inflated from 2004 through early 2007, before prices crashed and wreaked havoc on the economy and the global financial system. They’re being fueled by historically low interest rates – but also investors and economists’ belief that the housing market has a unique ability to support runaway prices. ![]() Housing prices are surging to new records with no end in sight.
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