Skip to main content

Is another housing bubble brewing?

While there have been fears expressed by some of a repeat of the housing bubble that led to the housing crisis just over a decade ago, numerous real estate analysts say they believe the market fundamentals are much stronger now and that the sharp increase in home prices reflects low rates, a lack of inventory, and demographics.

To be sure, the market is hot in many markets, with home sellers receiving multiple cash offers, often over the listed price, on homes. Some analysts, including those at Swiss banking giant UBS, have published charts showing how home prices are outstripping both wages and rents, reported USA Today. Home prices have appreciated more than 60% since November 2012, incomes have only appreciated by 20% and rents by 30% over the same time period, the report added.

“But unlike the real estate boom that led to the Great Recession, this nationwide price spike is not being fueled by a wholesale collapse in lender ethics,” USA Today reported “There aren't any low-doc or no-doc loans to be had and borrowers are having to do much more than fog a mirror to get funding.”

‘Chronic Lack of Supply’


"For over a decade, we've had a chronic lack of supply of housing," Marco Santarelli, CEO of Norada Real Estate Investments in Laguna Niguel, Calif., told USA Today. "We need 1.62 million units a year to keep pace with organic demand, but we produce significantly less. We're about 370,000 units short each year."

Santarelli added that the supply imbalance will only get worse as more than 140 million millennials and members of Gen Z move into rental units and starter homes in the years ahead.

"About 52% of young adults from 18 to 29 are still living with their parents," Santarelli told USA Today. "That's the highest rate in over 110 years. These people have to go somewhere and that's why I'm so bullish about real estate over the long term."

Out of Balance


But healthy fundamentals don't mean there aren't worrying distortions in the market, USA Today added.

“With the Federal Reserve continuing to buy Treasury bonds and other securities under its quantitative easing program, interest rates are being held artificially low as dollars are being pumped into the economy,” USA Today stated. “That makes borrowing cheap and encourages investors to buy riskier assets like stocks and real estate, driving prices of those assets ever higher.”

The analysis acknowledged that at a certain point, interest rates will rise and there won't be enough buyers coming in from more expensive markets to keep paying the higher prices. “Either development, or both, could lead to a pullback in prices,” USA Today said.

Also playing a role: the moratoriums on evictions and foreclosures are distorting the market and it’s not clear what will happen when the moratoriums are lifted.

And in many markets, rents have been dropping. In San Francisco, rents fell 24% in 2020, according to Zumper.com, which tracks rents across the country. Rent were downs nearly 20% in New York and 17% in Boston.

Rents Head in Opposite Direction


But in other cities like Newark, N.J., Sacramento, Calif., and Richmond, Va., where people are relocating, rents are moving sharply in the opposite direction.

Median home prices in cities experiencing major out-migration, however, have not fallen – at least not yet. New York, for instance, saw rents drop by 20%, but its median home prices rose 6%. The same trend holds true in San Francisco, Boston, Los Angeles and Washington, D.C., USA Today added.

"We had a 10.2% increase in home prices in Sarasota (Fla.) in 2020," one analyst told USA TODAY. "What I'm concerned about is that prices will continue to appreciate at 10% to 15% a year and that's not sustainable."

Comments

Popular posts from this blog

Digital Payments Lead the Way Globally: Key Insights from Worldpay Study

According to a recent Worldpay study, digital payments are rapidly becoming the preferred choice worldwide. The research highlights significant shifts in consumer behavior and payment preferences, driven by technological advancements and the growing acceptance of cashless transactions. Key findings from the study reveal that digital payments now account for a substantial portion of global transactions. Mobile wallets, contactless payments, and online banking are gaining traction, reflecting consumers' desire for convenience and speed. This trend is especially prominent in regions like Asia Pacific, where mobile payment adoption is leading the charge. The study also emphasizes the importance of security in fostering consumer trust in digital payments. As fraud concerns continue to rise, businesses must prioritize robust security measures to protect customer information and enhance the payment experience. Moreover, the transition to digital payments is not just about c...

Fixed-Rate 30-Year Mortgage Decreases

MCLEAN, Va.--The 30-year fixed-rate mortgage averaged 6.65% this week, a slight decrease from last week's 6.6, Freddie mac reported. “The 30-year fixed-rate mortgage ticked down by two basis points this week,” said Sam Khater, Freddie Mac’s chief economist. “Recent mortgage rate stability continues to benefit potential buyers this spring, as reflected in the uptick in purchase applications.” Freddie Mac noted: The  30-year FRM  averaged 6.65% as of March 27, 2025, down from last week when it averaged 6.67%. A year ago at this time, the 30-year FRM averaged 6.79%. The  15-year FRM  averaged 5.89%, up from last week when it averaged 5.83%. A year ago at this time, the 15-year FRM averaged 6.11%.

NCOFCU - "Video Mini's" The Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. Established in 1913 by the Federal Reserve Act, the Federal Reserve serves several crucial functions in the U.S. economy. Here are the main aspects of the Federal Reserve:  Visit NCOFCU's YouTube channel for more. "Video Mini's" The NCOFCU "Video Minis" are a series of concise 2-3 minute video presentations designed to deliver valuable insights and knowledge on key topics relevant to credit unions. Each video focuses on a specific subject, providing viewers with essential information in a brief and engaging format. These mini-presentations cover a range of subjects. Perfect for busy professionals seeking quick yet impactful content, the Video Minis make it easy to stay informed and enhance your credit union's operations and member services. Join us in exploring these informative and dynamic learning opportunities!

President Trump is leading the way toward reduced check usage by phasing out paper checks for government payments.

WASHINGTON—A new  executive order  from President Donald Trump bans paper checks as a form of payment for the federal government. The order was signed noting that Treasury checks are often reported stolen, and face other issues. The order also notes that payments made  to  the federal government are also modernizing. “Check fraud is a perennial concern for the banking industry, growing in recent years – reports doubled from 2021 to 2022. Target stores announced last year that they would stop accepting paper checks,” the Independent Community Bankers of America pointed out. “It's a great sign that the government is leading the way toward reduced check usage by phasing out paper checks for government payments,” said ICBA payments expert Scott Anchin, noting that consumers and financial institutions should maintain the ability to determine appropriate payment mechanisms for specific cases.  ABA President and CEO Rob Nichols said his organization welcomes President ...

Embracing ARMs And Battling Members’ Misconceptions

With adjustable-rate mortgages back in fashion, credit unions are educating members about the ins and outs of these products, dispelling misunderstandings along the way. With housing stock low, home prices high, and interest rates showing no signs of coming down, many credit unions are turning to adjustable-rate mortgages to help would-be borrowers find a home. ARM loans gained a bad reputation after the 2008 housing crisis and the Great Recession, but credit union leaders insist that with the right education and a clear understanding of how the product works, adjustable-rate mortgages can be an ideal solution for would-be homeowners. The Big Picture53% of those who don’t own a home believe homeownership is out of reach, according to a study from Northwestern Mutual . 58% of millennials feel this way, but roughly half of baby boomers and Gen X share the sentiment. According to Federal Reserve data, the average price of a home topped $510,000 at the end of 2024. That’s 32% higher than f...