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Will the housing market bubble burst? A housing market crash is unlikely as home prices continue to rise

Right now the United States is seeing some of the lowest interest rates and limited inventories in the housing market.

That on top of city dwellers looking to escape crowded living situations amid a pandemic have aided in a historical rise is housing prices.

What will happen when it’s done?

“The ‘Black Swan’ is the inevitable collapse in U.S. home prices —they are in the stratosphere benchmarked against all the fundamental factors that drive valuations,” wrote David Rosenberg, chief economist and strategist at Toronto-based Rosenberg Research.

In May the prices of homes rose by 16.6% breaking records and currently they’ve reached heights of 38.1% in increase. Their last time they peaked that high was in 2006.

Homes are now 25% overvalued, especially when compared to income measures.

Some experts think the peak has already happened and we may be on the down swing, but will it plummet?

Right now, probably not.

Mortgage applications have fallen for the last several weeks and the ability to start building purchased homes was halted due to lumber prices and lack of labor.

Those problems appear to be resolving as lumber prices plunge from their highest point and workers want to build homes again after federal unemployment ends.

The inventory for homes is still incredibly low, and adding homes isn’t likely to cause any issues like a Black Swan event (though there’s always that slim chance).

Categories: BusinessNews