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”. 

Recommended

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
The uranium price is soaring – here’s the best way to play it now
Energy

The uranium price is soaring – here’s the best way to play it now

Uranium, the key ingredient to nuclear power, has been ignored since the bubble of 2006, but now the uranium price is rising again. Dominic Frisby exp…
22 Sep 2021
I wish I knew what contagion was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what contagion was, but I’m too embarrassed to ask

Most of us probably know what “contagion” is in a biological sense. But it also crops up in financial markets. Here's what it means.
21 Sep 2021
Why is the UK short of CO2 and what does it mean for you?
UK Economy

Why is the UK short of CO2 and what does it mean for you?

The UK is experiencing a carbon dioxide shortage that could lead to empty shelves in supermarkets. Saloni Sardana explains what’s going on and how it …
21 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021