Thursday, October 14, 2021

News: October 14



Why the U.S. Housing Boom Isn’t a Bubble While the red-hot real estate market is finally showing signs of cooling, its meteoric rise has many Americans wondering if housing prices are a bubble that is about to burst, much like the collapse that triggered the Great Recession.............. I don’t think that it’s likely that we’re going to see a bubble burst in the way that we saw in 2008, 2009, and 2010 ............ First, loan standards that were loosened during the bubble are much tighter now, with stringent requirements for good credit, complete documentation, and a sizeable down payment. In contrast, the pre-recession years were pocked with subprime mortgages, low teaser interest rates that ballooned, weak underwriting, negatively amortized construction, and other questionable practices. ...............  Second, the boom of the early 2000s was also driven by a surge in home construction that led to abundant supply. But there’s been a building shortage over the last 10 years, especially in cities with high demand. The result is a supply-demand mismatch that can’t be resolved quickly or easily. ................ construction is expected to pick up in the coming months ........... The COVID-19 pandemic spurred buying in unexpected ways, and it’s unclear whether that high demand will remain after the pandemic subsides. ............ Millennials are now at the peak of their home-buying years, and those with good incomes are entering the market with gusto............ The situation has given rise to a new player in the real estate space: single-family rental companies. These firms are seizing the moment by buying up properties in desirable neighborhoods and renting them to families who cannot afford to buy in those neighborhoods.  ............. Rents have sharply increased in the last few years, outpacing inflation for the last decade. Keys expects that increase to continue, especially in cities with high housing demand............. Although it’s not a bubble, the real estate market isn’t immune to disruption. Keys said he’s keeping an eye on interest rates, which are still around 3% for a 30-year, fixed-rate mortgage..................... If there’s a spike in the rates because of some change in fiscal or monetary policy, it would have a chilling effect on buyers.

No comments: