Economists Warn of Potential Housing Bubble as Home Prices and Mortgages Rise
Summary from the AllSides News Team
On Tuesday, the Federal Reserve Bank of Dallas warned of a potential housing bubble fueled by investor speculation on top of pre-existing inflation.
Bubble or not, finding a place to live is getting more expensive, and not just in the U.S. The Dallas Fed report also pointed to hot housing markets in 11 other countries, including Canada, South Korea and several European nations.
Coverage of rising housing prices has been ongoing since the start of the pandemic, but recent developments have stirred additional concerns. A Tuesday report of the S&P CoreLogic Case-Shiller Index said home prices rose 19.2% in the 12 months ending in January. Another report from Realtor.com said the median home price in the U.S. was a record $405,000 in March 2022 — 26.5% higher than in March 2020. Furthermore, average mortgage rates have spiked from 3% in late 2021 to 4.42%, a level not seen since early 2019.
Coverage was widespread but most prominent in business outlets. Opinions on the existence of a housing bubble were generally mixed across the spectrum, with several voices discussing how today's trends differed from the 2008 financial crisis. Some coverage in right-rated outlets singled out California; a Fox Business (Lean Right) said the state’s high housing prices were “not so surprising.”
Featured Coverage of this Story
From the Left
What is a housing bubble? Answering your questions as housing market spikes
America's real estate market may be showing signs of a housing bubble as prices become “unhinged from fundamentals,” according to the authors of a blog post published by the Dallas Federal Reserve Bank.
House prices can fall out of sync with market fundamentals like supply and demand when there is a widespread belief that prices will keep climbing.
“If many buyers share this belief, purchases arising from a ‘fear of missing out’ can drive up prices and heighten expectations of strong house-price gains," according to the researchers.
From the Center
Housing prices are still surging, but a bubble doesn’t seem likely
Last week we learned that housing prices grew rapidly yet again in January.
The widely followed S&P CoreLogic 20-City Home Price Index was up 19.1% compared with January of last year — a blistering pace, especially considering that the growth was on top of the 11%-plus growth rate reported for January 2021.
It’s highly anomalous for housing prices to rise over 32% in a span of two years, and so the trend is causing some economists to start worrying about a possible bubble.
From the Right
Rising mortgage rates could begin to cool a still-hot housing market
Mortgage rates have rebounded from their pandemic-era record lows and are rising rapidly. Those rising rates will eventually tamp down demand and cool the smoldering housing market, although the question of how quickly remains to be seen.
The average 30-year fixed-rate mortgage was 4.42%, up more than 1.25% from a year before, according to Freddie Mac. Three weeks ago, the rate sat at 3.76% — the fastest three-week increase since the 1980s.
Much of the pressure behind the rising interest rates comes from the Federal Reserve, which raised its interest...
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