Housing bubble 2.0? Regional housing markets are beginning to look like they did in 2007 https://fortune.com/2022/05/09/hous...-are-beginning-to-look-like-they-did-in-2007/ When the U.S. housing bubble burst more than a decade ago, it brought the global economy to its knees. It turned out the multi-year housing boom through the early 2000s was hiding skeletons. Homebuyers, driven by a fear of missing out on home price gains, were stretching themselves well beyond their financial means. While zealous lenders were giving out mortgages (or better put, subprime mortgages) to folks who historically wouldn't have qualified. As that credit rushed in, it helped to drive the housing boom. However, as the housing market corrected, those bad loans created a foreclosure crisis that took many of the nation's biggest financial firms, like Bank of America and Citigroup, to their brink. Fast-forward to today, where the U.S. housing market is once again going through a historic housing boom. Over the past two years, U.S. home prices are up 34.4%—including a 19.8% jump over the past 12 months. That 12-month hike is more than four-times greater than the historic annual average (4.6%) posted since 1987. It's also well above the largest 12-month price jump (14.7%) posted in the years leading up to the 2008 financial crisis. Our ongoing housing boom has more economists pondering the most feared word in real estate: Bubble. Back in March, researchers at the Federal Reserve Bank of Dallas put chills down the spines of homebuilders and real estate agents when they The Dallas Fed researchers found home prices were becoming detached from economic fundamentals (i.e. household incomes). However, if a housing correction does come to pass, the Dallas Fed researchers don't think it'd cause macroeconomic issues like we saw from the last bubble. Unlike the last go around, they write "household balance sheets [today] appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom." That said, some regional housing markets could be in full-blown housing bubbles. At the very least, many markets are priced exorbitantly compared to what local income levels can support. That's what Fortune found after looking at an analysis by the Real Estate Initiative at Florida Atlantic University. Each month, researchers at the university calculate how overpriced or underpriced home prices are in America's 100 largest housing markets. In their own words, here's how the Florida Atlantic University researchers say to read their housing analysis: "A positive score represents a premium, implying that the average property in a metro is selling above its historical implied price. A negative score represents a discount, implying that the average property in a metro is selling below its historical implied price." Now, let's look at the data. The degree to which regional home prices are overvalued or undervalued Reading for March 2022 At the latest reading in March, Florida Atlantic University researchers found every one of America's 100 largest housing markets were overpriced relative to what economic fundamentals in the market would support. That includes 44 markets that are overpriced by at least 30%. While 13 markets are overpriced by at least 50%. The most overpriced markets are Boise (overpriced by 75%); Austin (66%); Ogden, Utah (63%); Las Vegas (60%); and Atlanta (60%). Those places have all seen an influx of new residents amid the pandemic's "work from anywhere" boom. That, in part, explains why home prices there have soared well above what local incomes can afford. It also raises the question: If a 2023 recession does come, and employers finally have the economic power to force staffers back into the office, will those housing markets be at a higher risk of a home price correction? To find the housing markets that are the most fairly priced relative to household incomes, just look for the places that saw an exodus of workers during the pandemic. Case in point: The metros of New York City and San Francisco are overpriced by just 3% and 13%, respectively. Mark Zandi, chief economist at Moody's Analytics, doesn't foresee a housing bust over the coming year. However, he says "overvalued" housing markets could see home prices fall 5% to 10% over the next 12 months while national home price growth flatlines to zero. Why? The economic shock caused by spiking mortgage rates this year, he says, should finally rein in the rate of home price growth. We're already seeing signs of a cooling housing market. While Moody's Analytics own research finds 96% of housing markets are overvalued, Zandi won't call this a housing bubble. In order for it to be a housing bubble, it would need both home price overvaluation and speculation in the market. Unlike the FOMO driven 2000s housing market, Zandi doesn't think speculation is driving our ongoing boom. The degree to which regional home prices are overvalued or undervalued Reading for March 2020 What's notable about the ongoing housing boom is the whiplash. Just two years ago, the housing market was reasonably priced relative to incomes (see chart above). In March 2020, only nine housing markets were overpriced by over 10%, according to Florida Atlantic University's calculation. Back then, Spokane, Wash. (overpriced by 26%) was the most overpriced housing market. As of March 2022, Spokane is now overpriced by 55%—which doesn't even put it in the top five—while 90 out of the nation's 100 largest markets are overpriced by 10% or more. At first glance, one might assume the COVID-19 recession dragged down the March 2020 numbers. It didn't. The ratios created by researchers at Florida Atlantic University were essentially the same in January 2020 as in March 2020. Simply put: March 2020 is a good point of reference. The difference between March 2020 and March 2022 speaks to how historically fierce the housing market has been during the pandemic. In a matter of two years, we've flipped from a normal housing market into one that is historically overpriced. The degree to which regional home prices are overvalued or undervalued Reading for March 2007 In order to find a housing market that closely resembles the current market, you'd have to travel back to the years leading into the 2008 housing crash. Back in March 2007, 99 of the nation's 100 largest housing markets were overpriced. While 40 markets were overpriced by at least 30%, and 19 markets were overpriced by at least 50%. While the top-line numbers in March 2022 and March 2007 are eerily similar, there is one striking difference. In 2007, many of the nation's most overpriced housing markets were in California, New York, and Florida. This time, Florida has a heavy concentration of overpriced markets, however, California and New York (which have both seen an uptick in out-migration during the pandemic) rank much lower. Look no further than Los Angeles. In March 2007, it was overpriced by 62%. As of March 2022, Los Angeles is overpriced by 10%. The last housing bubble was anything but even. As the housing market crashed through 2008, overpriced markets like Phoenix and Las Vegas got absolutely crushed. Not only were home prices in those markets booming, so was new construction. But as the market slumped, Phoenix and Las Vegas became oversupplied with new sprawling subdivisions. That oversupply drove home prices down faster, and made the foreclosure crisis in those markets even worse. This time around, Phoenix and Las Vegas are once again among the most overpriced housing markets. In March 2007, Phoenix and Las Vegas were overpriced by 59% and 72%, respectively. In Florida Atlantic University's latest reading, those two markets are nearing their previous highs. As of March 2022, Phoenix is overpriced by 55% while Las Vegas is overpriced 60%. Even worse: Phoenix is once again among the U.S. leaders for new construction. If a housing correction does come, Phoenix could quickly become oversupplied.
Interest Rates are going up... it's a simple solution to the problem. The sad news is many thought they'd get free loans until 2024, and that's been renegaded on. Now they got fucked.
%% THAT; + Dave Ramsey sold his ''big house on the hill'' .Then bought another one smaller / and building another one. But he still has his REALTORS liscense/TN
The only people who don't believe its a bubble are recent homeowners & housing shills who come on bubble vision to say "now is the best time to buy!" I'm sure its perfectly normal for houses to sell for 50-60% above the asking price like what I see here in the SF bay area. Its so bad in LA that 2 bedroom shacks are going for $1.2 million. I've noticed that recently homes are taking longer to sell. I assume that means the doubling of the mortgage rate is slowing them down.
The Fed's own economists are warning of a 19.5% housing correction and more rate hikes could set off a 'domino effect' https://www.businessinsider.com/fed...ng-correction-crash-economy-rate-hikes-2023-2
Mortgage demand from homebuyers drops to a 28-year low https://www.cnbc.com/2023/03/01/mortgage-demand-falls-interest-rates-rise.html
People are going to sell because they're told it's overvalued ?? Given how many people are either locked in at lower rates or already own their own home, the sellers aren't there. '07 was a credit/lending bubble, totally different than today. One interesting segment is new apartment buildings, they're not being built for families.
Agree...2007 was a credit/lending bubble. Nothing similar to what we have today. Secondly...its almost impossible to make general statements about a "USA Real Estate Market". No such thing. USA is split and divided too many ways to make a general trend statement or forecast. Northeast, lead by New York City is seeing continued price rises and continued strong demand regardless of mortgage rates or tight money supply. Florida, Texas, Atlanta, Charlotte all are also seeing steady demand and strong selling prices. Other areas of the south are much harder to forecast and a hard landing from rate hikes could make these areas weak in demand and pricing and show clear downward trends in demand and selling prices. Even mid Atlantic regions are hard to forecast like Philly, Jersey, Baltimore...some of these areas will be very strong and some weak. Pittsburg shows great strength...even though its located in a very difficult Mid West region. West Coast is also very very strong in demand and selling prices regardless of mortgage rates or tight money. And some neighboring states/cities such as Vegas area, Phoenix area, Utah, Idaho and all of Colorado show very very strong demand and strong selling prices. But again..as you move further into the Midwest...forecasting is much more difficult, specially if we start to see the beginnings of a hard landing. Its not just that people are moving to where they would rather live, now that they are working from home. But frankly, some areas of the US have gotten sloppy rich from fed printing and forever zero interest rates, while other areas have been ravaged and land raped by off-shoring of jobs and manufacturing. There is a clear and pronounced divide in America. The wealthy states will not show much real estate weakness anytime in the near future. The South and the Midwest may show serious weakness
%% GOOD sarcasm /few are selling because of someone's opinion thinks ''overvalued'' But even with rates rising, lumber tariffs,+median price of $420,000, no wonder inventory is much smaller . Sorry to see the regionak RE magazine go out of business but simply not enough inventory to even support a multiple list REALTORS magazine. Amazing change But that helps the travel trailer + mini house market.