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A housing bubble refers to an increase in property prices fueled by demand and speculation that results in such exuberant spending that it pushes the market to collapse. Housing bubbles begin with an increase in demand. Seeing as there has been a huge increase in demand for property in the United States recently, many are now speculating that the country is headed towards another housing bubble into 2022. That means there will come a point when the demand decreases or flattens at the same time as supply increases. But is the U.S. really about to become embroiled in a housing bubble?
The Rental Market Is in a Volatile State
The housing market is undoubtedly in a time of upheaval. For one thing, the homebuying market can have a knock-on effect on the rental market, and the latter is currently in a volatile state in the U.S. With the eviction moratorium in the United States ending, after it was put in place to protect tenants during the pandemic lockdowns, hundreds of thousands of Americans are at risk of being put out of their homes. Unfortunately, scammers are ready to take advantage of the volatile housing situation by peddling credit repair services, offering false loans, and other fraudulent activities, as it’s an opportune time to con desperate people. Due to the increase in false loans from scammers, you should make sure you’re aware of the latest mortgage rates now.
When the upheavals of the rental market are taken into consideration alongside the current state of the homebuying market, many have become convinced that we’re on the verge of another housing bubble. But is that actually true?
Is the U.S. headed for another housing bubble?
In short, the housing market in the U.S. has been red hot for the last year. Due to volatile mismatched supply and demand, property prices were pushed up, allowing some Americans to see a sharp increase in their equity. It may all sound hunky dory then, but the single greatest risk to property prices is rising mortgage rates, and many experts believe it’s a real possibility that the rates will rise a lot over the next year. If mortgage rates do go up, house prices will be driven down, and there would be the potential to enter a housing bubble. Other economic challenges could also contribute to a drop or stagnation in property prices.
However, even if there is a drop or flattening of prices, it’s unlikely to be anywhere near like the recession of the mid-2000s. Many safety measures have been put in place since to prevent another Great Recession from happening. For instance, mortgage credit availability is a lot tighter than it was in the mid-2000s, and the risker adjustable-rate mortgage loan now accounts for less than 5% of total purchase mortgage loans and refinanced loans, which compares with 35% at the peak of the previous cycle.
What do the experts think?
According to property market experts writing for Forbes, the current market is being driven by limited supply and heavy demand, so it’s unlikely the housing bubble burst is on its way. In fact, Forbes believes the housing market is anything but headed towards a crash and says the long-term outlook is very positive. An article in Fortune said much the same. It stated a supply glut was unlikely to come back anytime soon. While it admitted price growth could drop or flatten, the article said a mid-2000s-style crash is very improbable. And according to the National Association of Home Builders’ chief economist, a housing market crash simply will not happen, but the market is seeing some cooling on growth rates.
Only time will tell if the experts are right, but it looks unlikely that the housing bubble will burst anytime soon.