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Is the real estate bubble growing in the US?

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US house prices 6.6% increase In October compared to the same month in 2021 Median home price rises year-over-year for more than a decadea staggering streak of growth further boosted by covid-19.

A variety of economic factors conspired to push U.S. house prices to historic levels during the pandemic. Interest rates dropped rapidly, making mortgages more affordable. Encourage prospects to buy quicklyalthough lower rates were available.

This surge in demand was further fueled by the belief that buyers needed to act quickly to take advantage of the temporary lull in interest rates.The Economist Enrique Martinez Garcia A recently published report found that buyers The “fear of missing out” mentality that may have created the “bubble” in the housing market.

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But now that interest rates have risen significantly, mortgage prices have also skyrocketed, greatly reducing buyer willingness. While the prices of homes sold continue to rise, the frequency of their sale has dropped dramatically.

According to a report by the National Association of Realtors, Existing home sales in October decreased by 28.4% year-on-year, Down 5.9% from September. So is this a temporary result of the economic downturn, or a long-term adjustment to the housing market bubble?

Is it a real estate bubble?

“Bubble” is the term used to describe a market in which a bubble has occurred. price increase, driven by demand and speculation, has reached unsustainable levels. When those speculating on continued price gains begin to believe that the rise may not continue, it can trigger a selling spiral in which prices collapse.

was Large housing bubble of the 2000s This has been attributed to the influx of fresh cash into the housing market. This money, combined with favorable lending terms, pushed prices to unsustainable levels and burst the bubble.

But are we there again?a report A study authored by Martinez Garcia for the Dellas Federal Reserve found that price gains in recent months were even greater than those recorded in the build-up to the 2008 housing market crash. I was.

He said the “unprecedented pandemic boom” poses risks to the U.S. economy and housing market more specifically, sharp price correction It will lead to a recession.” But he added that a “bubble burst” moment was inevitable and could be avoided with prudent US monetary policy.

Given the fluctuating economic dynamics of the past two years, the housing market has endured a lot of uncertainty.Back to normal, perhaps House prices will readjust to some extent. However, at this stage, the prospect of a full-scale bursting of the bubble does not seem imminent.

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