The US Housing Bubble Is Completely Out Of Control: Be Ready For Housing Crash!

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The U.S. housing market is completely out of balance right now. In some locations, prices are soaring to levels last seen during the bubble burst that led to the Great Recession, but on the other hand, as Americans have been massively fledging away from big cities, as Americans have been massively fledging away from big cities, traditionally hot markets have been cooling rapidly, and home prices are dramatically dropping. The instability in both fronts is compromising city budgets and homeowners’ and landlords’ ability to meet their mortgage payments. Although some may argue that this is not a housing bubble, several indicators point otherwise.
The Federal Reserve has been artificially inflating real estate prices with record-low interest rates that are simply not sustainable in the long-run. Considering that affordable housing is practically removed from the picture, and there’s an enormous gap between supply and demand, soon enough the entire market bubble can deflate and push prices to a sharp correction. According to a recent survey, over 40% of all Americans are already predicting the housing market to crash in 2021. And that’s what we’re going to investigate in this video.
Amid a steep economic recession that has been lingering for almost a year, the housing market has been proven resilient as an unprecedented surge in demand sent prices to record highs. However, the supply of existing homes has dropped far below the six-month level considered normal. Although realtors are getting numerous offers, builders can’t keep up with demand and flipping is back. By analyzing the statistics standpoint, it’s not difficult to find experts comparing the current market to the pre-Great Recession bubble.
Just like the housing boom of the mid-2000s, home prices are rising way faster than personal incomes. They have increased over 60% since November 2012, while incomes have only grown by 20% and rents by 30% over the same time period. As a result, most homes are entirely out of reach for more and more buyers every year. Despite the fact that some economists argued that the inventory-starved housing market could incorporate some of those distressed properties, that doesn’t alleviate the impact for those homeowners facing severe hardships.
An out-of-balance housing market mean there are worrying distortions going on right now. Although some may argue we’re not in a housing bubble similar to what was seen before the previous recession since the current surge in prices isn’t fueled by speculative behavior but by a jump in demand, that demand has considerably increased primarily because Federal Reserve policies have been artificially inflating asset prices. With the central bank continuously buying Treasury bonds and other securities under its quantitative easing program, interest rates are being held artificially low as trillions of dollars are being pumped into the economy. The configuration may be different, but that is clearly a bubble.
The moratoriums on evictions and foreclosures are also distorting the market. Evidently, these policies are needed to prevent a mass displacement of low-income renters and homeowners in the middle of a ravaging health crisis. But eventually, they will have to be lifted, which can cause a tsunami of evictions, as well as a significant spike in foreclosures, if homeowners can’t sell or refinance their debt. In that way, sharply increasing the supply of homes, and as a consequence, leading prices to collapse.
With all that in mind, it is understandable why more than half of Americans believe the housing market will crash either this year or next year. Since consumer behavior is what drives every market, especially in the home-buying industry, the fact that 41% of the population is predicting the housing market bubble will burst during 2021 and push accelerating home prices to fall is particularly worrying.
In short, as the same institution that is fueling the price bubble is the one that can mitigate the effects of it, the historically low-interest-rate environment will continue to help the housing market to thrive despite the mounting risks. That is undoubtedly a very intricate situation, but the truth is that it might take just one of these factors to catalyze a dramatic crash. A housing market crash can be incredibly devastating for those who are investing in the real estate market for future returns on their investments, so if you’re amongst them, you should start preparing right now.

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Epic Economist

Epic Economist

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