This is why experts think America is in a real estate boom, not a bubble

This is why experts think America is in a real estate boom, not a bubble

The US real estate market has made unexpected gains thanks to the COVID-19 pandemic.

During the pandemic, house prices have soared at a record rate. The current average home price reached over $ 363,000 in June 2021, an increase of 23.4% year over year.

“You can basically see over the last 15 months we’ve seen a dramatic acceleration in home price growth to levels we haven’t seen in decades,” said Frank Nothaft, chief economist at CoreLogic. .

However, according to most experts, the market is shaping up to be a boom rather than a bubble.

“We say bubble because we can’t believe how much the prices have gone up,” CNBC real estate correspondent Diana Olick said. “A bubble is something that is inflated that can burst and change at any time and that is not really the case here.”

While speculation is certainly a factor, the main reason for the current demand for housing is low mortgage rates. At the start of the pandemic in March 2020, the 30-year fixed-rate mortgage rate stood at 3.45%. By July of that year, the number had fallen to 2.87%.

Supply is also an issue. According to the National Association of Realtors, the United States has reduced its housing needs by at least 5.5 million units over the past 20 years. This is a stark comparison to the previous housing bubble in 2008, when overbuilding was a problem.

“So we have an increase in demand due to record mortgage rates and we have a decrease in supply,” Nothft said. “So between over-demand and under-supply, prices are going up and they’re increasing at the fastest rate since the 1970s.”

Watch the video to learn more about the US real estate market and find out if it is in a bubble.



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