For the past several months, the housing market in many parts of the United States has seen phenomenal growth in the price of houses. Of course, high demand and low interest rates along with low inventory are to thank for the current climate in real estate. Nevertheless, it still leaves some Americans wondering, “is this a bubble that will burst soon?” Remember, it wasn’t so long ago that Americans saw home values increase rapidly, only to crash as a result of issues created by the sub-prime lending practices about 15 years ago.
Experts do agree that the rapid gains in housing prices are something to pay attention to. Experts estimate that about 5.5% of American home prices are overvalued. Additionally, unemployment levels have still not recovered from pandemic related layoffs and business closures. According to Suzanne Mistretta, senior director at Fitch Ratings, “Slowing employment recovery and still-high unemployment levels are not supportive of long-term sustainable price growth.”
In an article published by MarketWatch.com, journalist Jacob Passy is careful to point out that real estate and economy experts do not expect there to be a housing market crash, but predict that the housing market will cool off. The reason it won’t sustain the current rate is explained by Robert Dietz, chief economist at the National Association of Home Builders, “When home prices are growing faster than incomes, ultimately that is an unsustainable trend.”
As the reset of 2021 plays out, Americans may see interest rates increase modestly, which may slow the rise of housing prices. Some homeowners who requested forbearance on their mortgage, may not be able to resume the payments due to unemployment and decide to sell their homes instead of risk foreclosure. These additional homes going up for sale may also provide a relief in the demand and help prices remain steady.
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