Currently Reading

Home Prices Increase 17.2%—Is the Housing Market in a Bubble?

Advertisement
Economics

Home Prices Increase 17.2%—Is the Housing Market in a Bubble?


April 26, 2021
House in bubble
Photo: Torian | stock.adobe.com

The median price for an existing home reached $329,100, a 17.2% year-over-year increase, causing some fear of an unsustainable bubble, but Bloomberg says not to fear. Bubbles are driven by irrational behaviors driving up prices, yet the housing market’s price acceleration can be pinpointed to low inventory. Bloomberg suggests the thriving housing market will remain for quarters, if not years. Housing stock remains at a record low with just 2.1 months of supply, according to the National Association of Realtors, but even so, housing affordability levels remain stable.

Another way to look at this is through the lens of household finances. Household balance sheets are in pristine condition. Debt as a percentage of personal income has dropped to 85.3% from a peak of 117.1% in 2009, according to the Federal Reserve. The ratio of total required mortgage service payments to total disposable income has plummeted to 3.97 from the high of 7.21 in 2007.

Sure, inventory levels can change quickly, as we saw between 2005 and 2007, and no doubt sellers will test the market later this year as the pandemic eases. But there is little reason to worry about the current situation reversing anytime soon to the point where supply overwhelms demand. As Bill McBride, who runs the Calculated Risk blog and called the last housing crash, has noted to readers, demographics are about to become a huge tailwind for housing.

Read More
 

Related Stories

Market Data + Trends

Monthly Housing Inventory Drop Improved Slightly in April

Spring homebuying season came in full force in April yet the expected increase in listings did not, says Zillow. Back in March, there were signs…

Housing Markets

Colorado Homeowners See Dramatic Home Value Increases

During the first eight years of homeownership, one Colorado resident’s home increased in value modestly—it took just two years for the home’s…

NAHB

What the Latest Economics Research Means for the Industry

On an aggregate basis, residential construction costs are up nearly 10%, says Robert Dietz, chief economist for the National Association of Home…

Advertisement
Advertisement

More in Category




Advertisement
Advertisement

Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.


Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Subscribe
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.