The U.S. has experienced an unprecedented housing boom, largely caused by the Covid pandemic. Demand for homes in some markets has grown exponentially, especially as companies relax or lift rules about where employees work.
Apparently, many New Yorkers don’t think it makes sense to pay Manhattan (or even Queens or Long Island) prices when they can move to Florida. In fact, many Wall Street firms have offices in southern Florida cities such as Miami, Fort Lauderdale and West Palm Beach.
This has caused price explosions in these markets as someone sells a Manhattan one-bedroom for $500,000 thinking that when the same dollar figure buys you a two- or even three-bedroom in a Florida city, they will get a deal.
The influx of New Yorkers had a knock-on effect, pushing locals further north, even into central Florida. Both markets saw growth, but not nearly as fast as South Florida saw price growth. While prices in New York stagnated for a while, things took a turn when pandemic-related restrictions eased, as New York (and other big cities) remain a huge draw despite gloomy and gloomy forecasts .
But with mortgage rates at their highest levels in years (though still historically low), some have been questioning whether the housing market will collapse.
Is there a real estate bubble?
In general, real estate is local, not national. That wasn’t the case in 2008, when the housing market crashed and many people couldn’t pay mortgages they probably shouldn’t have taken out in the first place because of the economic downturn.
Not at all now. Home prices may stabilize in some markets as demand softens or supply increases, but there does not appear to be a nationwide catalyst like in 2008 that would lead to the bursting of a general housing bubble.
However, prices have been high and may drop in some markets.
“Prices have risen sharply almost everywhere. Moody’s Home Price Index shows a 32% increase in national home prices over the past two years. The National Association of Realtors reports an even bigger increase of 39%,” NPR report.
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Economists told news agencies that prices could fall in the most “lively” markets.
“I would expect prices to fall,” Mark Zandi, chief economist at Moody’s Analytics, told NPR. “If you told me two years from now that prices are 5%, 10%, 15% below today’s peaks, I’d say that’s about right for me.”
A fall is not a crash
Cooling house prices does not equate to a housing market crash.Home prices continue to rise, according to reports Article by Dan Weil of TheStreet.
“As for home prices, the Case-Shiller home price index rose 19.8% in the 12 months to February,” he wrote. “In terms of interest rates, the average 30-year fixed-rate mortgage rate was 5.3% in the week to May 12, the highest level since July 2009, According to housing agency Freddie Mac. That compares with 5.27% a week ago and 2.94% a year ago. “
While the market may cool, new report The hot market will cool, JPMorgan said, similar to a possible correction described by Moody’s Analytics.
In this research report, we highlight specific parts of overheating in detailed data by counties across the United States. In places like Denver, Seattle, Washington, D.C., Portland, Oregon and Boston, for example, prices remain high despite increased supply, suggesting some revision risk to JPMorgan’s model. Cities with astonishingly high home prices like New York City and the San Francisco Bay Area suggest that even with supply constrained, there is some chance of a correction. But nowhere has the same combination of rapid price growth, rapid debt growth and expanded supply seen in some regions in 2006.
This makes sense considering the price is on a historical basis. “The national nominal house price index is now 40 percent above its 2012 low and 4 percent above the peak reached in 2006,” JPMorgan said.
Ending new highs and some market slowdowns is not the same as what happened in 2008. And, if the market cools a bit, it could attract more buyers who choose to stay on the sidelines.