Robert Shiller was an earlier predictor of not just one, but two bubbles in the stock market and real estate market, including the 2007 bubble and bust leading to the Great Recession. Over a decade later, he’s once again sounding the alarms of another potential shift in the housing market, but homeowners and prospective buyers may be better protected this time around, Fortune reports.
Though homebuying risks are mounting as price growth continues its upward trajectory alongside rising mortgage rates, the market is expected to cool slowly in the year ahead. Americans are also less debt-burdened than they were in 2007, when many buyers turned to subprime mortgages to purchase homes. Mortgage debt service payments accounted for 7.2% of U.S. disposable income in 2007, but that share is down to just 3.8% in 2022.
"Our economists have been chiming in on this for a bit now: the market is slowing down, but homes aren’t getting cheaper anytime soon. Price growth will slow/flatten (when compared to the breakneck start of [the] year), but the lack of supply is a fundamental pressure that will keep values aloft," Will Lemke, Zillow's spokesperson, tells Fortune.
In the eyes of housing bears, firms like Zillow are underestimating the possibility of oversupply. In their view, there's a chance all those spec homes under construction could see markets like Atlanta, Austin and Dallas get oversupplied in 2023. If that happens, it'd put downward pressure on home prices.