![]() As housing inventory catches up, this will add to the current supply available on the market. Homes that are already owned also become unaffordable which leads to default and foreclosure. Combine these with expensive prices and homeownership becomes out of reach. These are mainly an increase in mortgage interest rates and a downturn in general economic activity. Federal Housing Finance AgencyĪt some point, however, a few things will trigger demand to decrease. Federal Housing Finance Agency and notice how this is exactly what had happened before the housing crisis of 2008 – 2009. Take a look at the chart below of the All-Transactions House Price Index for the United States from the U.S. So, with so much demand but limited supply, home prices will naturally rise. The supply of housing is slow to react to increasing demand simply because it takes a long time to build a house or (in highly developed areas) there isn’t any more land to build on. Of course, home prices are driven by the law of supply and demand. These variables can combine to cause a housing market bubble. Excessive risk-taking by mortgage borrowers (both home buyers and real estate investors) based on unrealistic appreciation estimates.A lowering of underwriting standards that brings more buyers to the market.Low levels of interest rates that make housing more affordable.An increase in the population entering the housing market.An upturn in general economy that encourages homeownership.The reason for the increasing demand could be due to various reasons like: According to Investopedia, a real estate bubble is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse. Related: How to Recession-Proof an Investment Property What Is a Housing Bubble?īefore answering our main questions, let’s quickly explain what a housing bubble is and what causes it. So it’s only natural to wonder if a new real estate recession is coming in 2020 and, if so, how will it impact real estate markets, investors, buyers, sellers, and homeowners? Here’s all you need to know. After all, it is the bursting of the housing bubble which caused the Great Recession from 2007 – 2009 and some people are still dealing with its effects to this day. Since demand has been fueling house prices for a few years now, many are concerned that a new housing bubble has started to form in the US. The increasing number of buyers combined with a low inventory of available homes for sale are also contributing to home price increases. Home values continue to rise in most major markets and Zillow expects them to increase a total of 4.1% nationally by the end of 2019. ![]() Exactly ten years later, the national real estate market has come a long way since those dark days. ![]() Should we be worried about the US real estate market entering another housing bubble in 2020? Let’s take a look at what the top US housing market predictions and trends are telling us.Įver since the Great Recession ended in 2009, the United States has experienced an economic expansion that is currently considered the second-longest in American history. ![]()
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