US home prices are rising coast to coast and are outstripping wages and rents. Some say it’s another housing bubble.
In the midst of a raging Covid-19 pandemic, with millions of Americans still out of work and facing the possibility of eviction and foreclosure, the United States is experiencing a real estate boom the likes of which it hasn’t seen in 15 years.
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Nearly 75% of the 100 largest U.S. housing markets saw annual home price growth of 10% or higher, according to Black Knight. Markets with the strongest price appreciation could be most at risk.
Home prices are rising practically everywhere. From Augusta, Maine, to Phoenix and from Sarasota, Florida, to Aberdeen, Washington, prices are up by double digits.
“The data from the last several months are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, Managing Director at S&P Dow Jones Indices.
Driven by historically low interest rates that make borrowing cheap and waves of people fleeing densely populated cities because of Covid-19, home buying has become as competitive as it was during the boom years of the mid-2000s.
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By GlobalData“When is the housing market going to crash?”
But there is increasing concern among consumers that housing is experiencing a price bubble – and that the bubble may be ready to burst.
Google has reported that the search question “When is the housing market going to crash?” had spiked 2,450% in the past month. “Why is the market so hot?” searches had doubled in just a week.
And, in the most telling indication that the market may be in a bubble, “How much over asking price should I offer on a home 2021” jumped 350% in that same week.
There are various measures of home prices, but one of the most timely and watched is from CoreLogic, which showed prices up 10.4% in February year over year. That is the largest annual jump since 2006.
It’s unlikely…
Homebuilders are slowly increasing production, and new government Covid stimulus could add to that.
As the economy opens and more Americans are vaccinated, cities could see a rebirth, taking some of the heat out of all that suburban competition.
So, will the housing market crash? Unlikely.
It will cool, no question, but unlike the great housing crash a decade ago, mortgage underwriting is very strict now, so most homeowners can afford the homes they’re currently in.
If prices chill or even drop slightly in some markets, it will not lead to a foreclosure crisis. Investors are quite heavy in the market as well, given the high demand for rentals, and that should serve as a backstop for major price declines.
