The S&P CoreLogic 20-City Home Price Index was up 19.1% year-over-year in January, and elevated mortgage rates are pushing affordability even farther out of reach for a growing share of buyers, but housing experts aren’t yet daunted by the prospect of another housing bubble. Current growth rates exceed those that preceded the Great Financial Crisis, but today’s bull market is driven less by rampant speculation, and instead, by a widening supply and demand imbalance, CNBC reports.
As mortgage rates inch closer to 5% and housing prices continue to skyrocket, market conditions aren’t likely to improve for several months, but high-priced, in-demand housing also creates a prime environment for home builders, who have reported increased sentiment over the last year.
The housing sector is very important to the U.S. economy. Artificially suppressed interest rates undoubtedly pulled forward some home price appreciation, and the massive appreciation in home prices to date will, unfortunately, lock some prospective first-time buyers out of the market.
But it’s hard to see any kind of crash similar to the GFC. Demand is simply too strong while supply is too limited.
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