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

What will happen to the price of gold in 2022?
Gold

What will happen to the price of gold in 2022?

Gold is traditionally the go-to asset during inflation. But with inflation at 30-year highs, it has gone nowhere. Dominic Frisby investigates why, and…
20 Jan 2022
UK inflation is at a 30-year high and it hasn’t peaked yet
Inflation

UK inflation is at a 30-year high and it hasn’t peaked yet

UK inflation has hit 5.4% - its highest in 30 years. And it could be heading higher. John Stepek explains what it means for you and your money.
19 Jan 2022
Index fund
Funds

Index fund

Index funds (also known as passive funds or "trackers") aim to track the performance of a particular index, such as the FTSE 100 or S&P 500.
18 Jan 2022
Model Y: Tesla has nailed it once again
Cars

Model Y: Tesla has nailed it once again

The electric carmaker’s new SUV crossover, the Model Y, sets the benchmark in the sector.
18 Jan 2022

Most Popular

Five unexpected events that could shock the markets in 2022
Stockmarkets

Five unexpected events that could shock the markets in 2022

Forget Covid-19 – it’s the unexpected twists that will rattle markets in 2022, says Matthew Lynn. Here are five possibilities
31 Dec 2021
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Tech stocks teeter as US Treasury bond yields rise
Tech stocks

Tech stocks teeter as US Treasury bond yields rise

The realisation that central banks are about to tighten their monetary policies caused a sell-off in the tech-heavy Nasdaq stock index and the biggest…
14 Jan 2022