Housing Bubbles in Major Cities Sound the AlarmPaul-Martin Foss
Housing prices in Denver, Houston, Miami, and the Washington, DC metropolitan area are officially considered overvalued. While that’s probably not news to the people who live in those areas, it’s yet more evidence that the housing market in the United States is reaching, if not already well into, bubble territory.
Surprisingly, markets in San Francisco and New York City are considered to have “cooled,” despite the fact that they Bay area’s housing prices still rose 5.3 percent in June. Overall, housing prices in the United States are up over 50 percent since their lowest point in 2011, aided by a dwindling supply of houses. Many affordable houses were scooped up by investors and speculators during the aftermath of the financial crisis, as they sought to benefit from rental income.
Housing inventory nationwide is at a 20-year low, as builders seek to capitalize on rising house prices by building larger and more expensive houses, ignoring the low end of the market. And with baby boomers continuing to hold onto their houses into retirement, hoping to cash out at some point in the future, younger home buyers find themselves locked into bidding wars just to get any house that’s available. None of this bodes well for the future of the housing market.
With bubbles in evidence all over the country, more and more potential homebuyers unable to purchase homes because incomes are too low and prices are too high, the best summation of the housing market is that it’s a complete mess and shows no sign of improvement any time soon. Add in the continued effects of loose central bank monetary policy and you have a situation that’s ripe for a repeat of 2008.