America’s red-hot housing market
US house prices soared by 16.6% in the year to May, and the rally looks like it will keep on going.
US housing is “red hot”, says John Detrixhe on Quartz. Prices soared by 16.6% in the year to May, according to the S&P CoreLogic Case-Shiller index, a record jump. And there is plenty of “fuel” to keep the rally running, from ultra-low interest rates to the “mountain of personal savings” that Americans accumulated during the pandemic. The surge is reviving memories of the mid-2000s housing bubble that ultimately caused the 2008 financial crisis.
That market slump led to “chronic” underinvestment, says Dana Peterson on CNN. That sowed the seeds of the “woefully insufficient” housing stock powering today’s boom. Yet where the 2005-2007 boom and bust rested on “speculation” and “predatory lending”, today’s rally looks more secure. Housebuyers have better credit scores than those who leveraged up before 2007. Stricter regulation also means that a house-price slump shouldn’t cause big banks to “buckle under financial stress”.
Optimists think “prices will come under control once demand naturally levels off”, says Mike Bebernes for Yahoo News. They say the end of Covid-19 will “reduce the desire for spacious homes and... the need for super-low interest rates”. A big collapse may be unlikely, but that doesn’t mean this boom isn’t creating other problems. “Sky-high” house prices “will exacerbate inequality” and could “become a major driver of inflation”.