Is Irrational Exuberance the New Normal? – Realty Biz News

real estate trends and irrational exuberance - deposit photos

Sooner or later every real estate boom comes to an end. Real estate has been the poster child for a “V” shaped recovery during the COVID-19 economic recovery. But now, that real estate exuberance is facing an affordability plateau that might finally dampen some of the irrational exuberance.. There are two strong economic forces at work here. Both involve the lack of affordable housing. There can be no denying that the U.S. is experiencing the highest level of demand for affordable housing since millions of servicemen returned from WWII.

The WWII Housing Boom That Reshaped America

The G.I. Bill almost single-handedly built the American middle class by addressing the core social needs of unemployment, education, and health care. And importantly, it did so through government-backed, low-interest, fixed-rate mortgages with zero or low-down payments with up to 30-year terms. In effect, the G.I. Bill put homes within reach of all but the poorest American vets. The American suburb was born.

It was several years earlier when President Roosevelt laid the groundwork when he said, “A nation of homeowners, of people who won a real share in their own land, is unconquerable.” This was an affordable-home revolution from our past. But what does that have to do with today’s need for affordable housing? More than a little. Although the 20-year war in the middle east is ending, there will not be 15 million vets coming home in search of a family home. But there are still millions of Americans in search of an affordable family home.

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Authored By Brian Kline
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Most Overvalued Housing Markets in the United States – Fortune

overvalued housing markets

They say everything’s bigger in Texas, but when it comes to overvalued housing markets, the Lone Star State doesn’t hold a candle to Idaho.

A new survey from Florida Atlantic University and Florida International University looks at the nation’s most overvalued homes, with Boise, Idaho, topping the list. Homes in the Gem State sell for a stunning 80.64% premium, based on a history of past pricing.

The work-from-home trend is largely responsible for that. As people moved out of big markets during the pandemic, they looked for less dense areas that still offered attractive amenities. In addition to Idaho, Utah has been an especially popular destination for buyers, the study found.

Of the 100 cities looked at in the study, 95 showed some level of overvalue. The rapid price appreciation should serve as a warning to buyers, say the study’s authors. If you plan to move soon, you could find yourself later selling property at a loss.

Full Story From Fortune

Realtor.com Forecasts Slow But Strong Fall US Housing Market

Fall US Housing Market - Deposit Photos

The forecast for the fall US housing market is lower temperatures—and a cooler real estate market, if only by a few degrees. The housing market is expected to shift to something closer to normal this fall, real estate experts say. They anticipate more homes will go up for sale, helping to slow down the unparalleled price increases and bidding wars of the past year.

But real estate is likely to remain highly competitive, as there will still be many more buyers than homes to go around.

“We’re going to exhaust the pool of buyers who are still sitting on a lot of cash looking to buy their next home,” says Realtor.com® Senior Economist George Ratiu. “The market does not have a magical way of sustaining this pace [of price growth], because you’re going to run out of people who can afford it.”

However, that doesn’t mean that home prices, whose national median hit an all-time high of $385,000 in the week ending Aug. 14, will drop in the fall US housing market. In fact, prices increased 8.6% year over year that week. But that’s significantly less than the 17.2% annual rise in April.

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Authored By Clare Trapasso
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Every Real Estate Bubble Bursts Eventually

Real Estate Bubble - Deposit Photos

One of the benefits of a five-decade tenure in an industry is hindsight. There was a real estate bubble! Yes, it’s always crystal clear!

Unfortunately, looking into the future is a bit murkier. Every January, we are festooned with economic forecasts from scholars. Doubt what I say? Simply tune in for the Chapman, Cal State Fullerton, UCLA, Charles Schwab reviews and others. All will give their opinion on what the blossoming year will have in store for our economy. Predicted will be growth in commerce, changes in consumer confidence, outlook for interest rates, stock market trends, inflationary pressures and the impact of all of the above on real estate pricing.

But it’s August, and you may be thinking, why look forward to January? Well, when you see Christmas decorations next month, you’ll understand. These next four months will fly by!

I’ve consumed several of these Nostradamus events over the years. One of the most meaningful was in February of 2020. Featured was a panel of experts assembled by Northwest Mutual. One gentleman, in particular, gave a brilliant narrative on the forces that cause a downturn. From my notes: “Mentioned during the preamble was a check of five factors that cause bear markets — inflation, recessions, commodity shortages, crazy market valuations and uncertainty.”

Full Story From the Whittier Daily News

Red-Hot US Housing Market Shows Signs of Cooling – CNN

ice house - pixabay

Who would have thought that when the pandemic struck last spring that single-family housing would go on such a stellar run? Not me. But housing has been on a tear. Home sales, homebuilding and especially house prices have surged.

Despite being overvalued, there is no sign the housing market is in a bubble. (A bubble develops when there is speculation, or when buyers purchase homes with the sole intent of selling quickly for a profit, which isn’t happening today.) But stress lines are beginning to appear, and the housing market is set to cool off.

The increase in home prices is stunning. Nationwide, house prices are up double digits over the past year, and this comes after a decade of solid price gains since the housing market bottomed in the aftermath of the financial crisis. Indeed, the median existing home price — half of homes sold for more and half for less — is closing in on $350,000, almost double what it was a decade ago.

But stress lines are beginning to show in the housing market. Home prices have risen so far, so fast, that they have become overvalued. Nationwide, house prices appear overvalued by approximately 10% to 15% when comparing price-to-income or price-to-rent ratios with their long-run historical averages, according to my analysis. Some markets, mostly in the South and West, are seriously overvalued — by more than 20%.

Overvalued housing markets are vulnerable to a meaningful price correction as mortgage rates eventually rise. And they will. The Federal Reserve thinks the economy is set to quickly return to full health and is signaling that it will thus soon begin to normalize interest rates. Moreover, work from anywhere, while likely a fundamental change in the way we live and work, is also sure to partially unwind as companies ask their employees to come back into the office. And the foreclosure moratorium and mortgage and student loan forbearances are set to expire in coming weeks.

Full Story From CNN