Reply to Federal Reserve: signs abound that housing market is entering bubble territory

Forum Index » Real Estate

Reply to "Federal Reserve: signs abound that housing market is entering bubble territory"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous]NP.  I thought the problem was supply not demand. In other words there is not an unusual amount of buyers but that there is historically low inventory and that’s what’s driving the frenzy. Is that not the case?[/quote]

Low inventory does not mean number of houses that exist. Inventory is the number of houses for sale at a given time.

There were more home sales in 2021 than in 2019. Tons of houses were sold. The problem now is that there are a lot more buyers after summer 2020. The question is why do more people now want to buy a home vs rent, live with roommates or family, etc. It seems to me (and many other analysts) that the most likely reasons are low interest rates, stimulus from the government, and desire not to live with roommates/family after months of quarantine. As demand built, prices went up and the FOMO cycle began. Please remember that it is not only primary residences that are being purchased. Much more investment activity this time (mostly mom and pop investors, but also ibuyers and institutional investors). Inventory is low because there are all sorts of interests buying houses (people living there, investors, etc) and they are buying them quickly so the houses don’t stay on the market so long.

Just step back and think about it. If we don’t have enough houses for everyone, why did prices shoot up so quickly? Where were all those buyers before? Millennials were not homeless, and they are free to continue whatever living arrangements they had. Investors were investing elsewhere. What changed was Covid, and the Fed and Congress juicing the market to make real estate a very attractive investment. Once it is not longer attractive (for example, interest rates jacked up and/or perception that we are at the peak), investors will look for returns elsewhere and people needing a place to live will make other choices (stay in the house they own instead of upgrading, rent, live with family, etc).[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics