Sure, never underestimate the American desire to take things to excess. You may not like those reasons but that’s not the same thing as a speculative mania. Just because prices are rising does not automatically make something a bubble. They decided to settle down and buy a home even though it seemed like that would never happen following the Great Financial Crisis.Īnd a combination of the pandemic, remote work and low interest rates have all pushed even more people to start buying houses. Like all previous generations, millennials got older. My generation put off buying a house much longer than our parent’s generation because more of us went to college or the financial crisis or we just didn’t want to grow up as fast. The oldest millennial is turning 40 this year (that’s me). Millennials are now the biggest demographic in this country. housing prices are in a bubble while prices elsewhere are in a mega-bubble but you would have more sympathy from me as a bubble-caller if you’re talking about Toronto and Vancouver. I suppose you could make the claim that U.S. Prices in Canada and the UK have handily outpaced the United States this century. If you want to call a housing bubble somewhere, there are much better options in other countries: Look elsewhere if you want to call for a bubble. Now there is more than $21 trillion in home equity and $10 trillion in mortgage debt.ĭuring the last bubble people with terrible credit scores took on too much debt that they couldn’t possibly hope to repay. Now look at how much more equity people have in their homes:īy the end of 2007 there was more than $10 trillion in home equity but more than $9 trillion in mortgage debt. consumer is in better shape than they’ve ever been coming out of a recession: consumer’s finances.Ī combination of falling rates, some trepidation following the last crash and a healthy dose of stimulus payments mean the U.S. consumer balance sheet has improved. Another reason this is nothing like the subprime crisis is the state of the U.S. In some ways I don’t blame these homebuilders but their reluctance to build is one of the signs things aren’t nearly as frothy as they were in the mid-2000s. Look at that spike in new homes around 20: Homebuilders are still gunshy because they built so many homes during the last bubble and were left holding the bag in many instances. There are also fewer homes on the market because so many homeowners felt uncomfortable having strangers walk through their house while an airborne virus is spreading around the globe.Īnd the hangover caused by the last housing boom and bust caused homebuilders to pull back on the number of homes they built: Yes, there has been an increase in people moving because of the pandemic and the work from home opportunities it has created. Yet the reason for this isn’t necessarily a bunch of ravenous home-buyers. The supply of existing home sales on the market is as low as its ever been on record going back to the late-1990s: Supply is constrained but not for the reasons you think. This means the banks pulling back on lending or households pulling back because they have been worried about the effects of the pandemic on their finances.Įither way, if more people eventually begin to take out loans this could actually lead to another leg higher in the housing market. Loans are mostly being made to those with high credit scores and sizable down payments, the exact opposite of the subprime housing boom.Īccording to the Wall Street Journal, mortgage credit availability is near its lowest point since 2014. Just look at the credit scores for mortgage originations: Yes, housing prices are rising at a rapid clip but this is nothing like the subprime crisis. The logical conclusion for many prognosticators is to call this yet another housing bubble. We’ve all heard anecdotes of housing shortages and ridiculous all-cash offers. I would expect the numbers will be even higher in subsequent months. The latest Case-Shiller Index data showed an 11% year-over-year increase:Īnd this data is only through January. There’s no question residential real estate in the United States is on fire.
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