Will 2017 be the year of the Housing Bubble?April 20, 2017
Many questions havearisen amongst economists and real estate experts regarding the possibility of a 2017 housing bubble. Here’s the consensus.
According to the S&P CoreLogic Case-Shiller Indices, home prices have been soaring, increasing in February for the fourth consecutive. There are certainly grounds for concern; however, it would appear that the majority of experts agree that we are not in the midst of a housing bubble.
No housing bubble, just a recession.
Participating in a HousingWire webinar this week, Mortgage Banker Association chief economist Mike Fratantoni, Fannie Mae chief economist Douglas Duncan, and Veros CEO Darius Bozorgi agreed that there is no bubble right now. The steady growth that we see in the market now does not resemble anything that we saw in the industry after 2007/2008.“I wouldn’t be shocked if we hit a flat period with minimal growth before we start growing again,” Fratantoni stated, referring to future home prices.
Some disagree – trouble on the horizon?
A researcher from the Atlanta Fed expressed concern serious concern:
“A decline in housing affordability may be considered a leading indicator of potential stress in the market that could lead to a market correction. Simply put, as housing affordability diminishes, households begin to experience greater stress in covering their housing costs. In such a scenario, the demand for housing declines, inventory levels increase, and home prices trend downward.”
Investment Analyst Victor Xing agreed, writing in a Quora and Newsweek article that the stagnation in demand for high-end housing following swift price growth of a significant period of time could be disconcerting. According to realtor.com Senior Economist Joseph Kirchner, “sales are increasingly concentrated at the mid- to upper-end of the price range…Sales of affordable new homes under $200,000 dropped to 12% from 17% of the market since last April.”
Interest rates are key
Investment analyst Alessandro Bruno, however, believes that a housing bubble isn’t on the horizon and that the 2017 housing market will remain strong, “so long as mortgage rates remain at four percent or lower.”Fratantoni noted in the HousingWire webinar that one of the greatest threats to the market would be if the Federal Reserve waits too long to raise interest rate, though.
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