Is the US already in a housing bubble? | Fox Business

"A housing bubble can generally be defined as an unsustainable period of house price growth generated by artificial demand, such as loose ... closevideoMichaelKantrowitzcallsweakhousingmarketan‘ominoussign’PiperSandlerchiefinvestmentstrategistMichaelKantrowitzargues'theweaknessinhousingdataisyourtypicalcanaryinthecoalmine.'TheFederalReserveBankofDallasmadeheadlinesinrecentweeksafterwarningthattherearesignsofa"brewingU.S.housingbubble."ThatprospectsparksfearinanyonewhoremembersorfelttheimpactsofthehousingmarketcrashthathitAmericaduringthe2008financialcrisisandsubsequentGreatRecession. Whilemosteconomistsappeartoagreethattherearealotofdifferencesbetweenwhatishappeningnowandwhatoccurredinthelateaughts,thejuryisstilloutonwhetherahousingbubbleiscurrentlyuponus–andwhatthatcouldmean.HomesunderconstructionattheCieloatSandCreekbyCenturyCommunitieshousingdevelopmentinAntioch,California,U.S.,onThursday,March31,2022.U.S.homepricesshowssignsofbecomingunhingedfromfundamentalsliketheydidinthehousing(Photographer:DavidPaulMorris/BloombergviaGettyImages/GettyImages)"Ahousingbubblecangenerallybedefinedasanunsustainableperiodofhousepricegrowthgeneratedbyartificialdemand,suchaslooseunderwritingorspeculativebuying,"explainsOdetaKushi,deputychiefeconomistatFirstAmericanFinancialCorporation."Thepricegrowthintoday’smarketisdrivenbyanextremesupplyshortagerelativetodemand."Indeed,thehousingmarketrightnowisexperiencingrecord-lowinventories,andpricesareatrecordhighs.HOMEBUILDERCONFIDENCEFALLSFORFOURTHSTRAIGHTMONTHKushisaysthatlookingbackatthehousingbubbleinthemid-2000s,housepriceappreciationwascharacterizedbyasurgeindemanddrivenbywideraccesstomortgagefinancing."Thehousingmarkettodayisnotdrivenbylooselendingstandards,sub-primemortgages,orbyhomeownerswhoarehighlyleveraged,"shesays."Thehousepriceappreciationintoday’shousingmarketissupportedbythefundamentalsandcharacterizedbyashortageofsupplyrelativetodemand."BradDeLong,aprofessorofeconomicsattheUniversityofCalifornia-Berkeley,toldFOXBusinessoveremailthathelooksattheexcessofhousingabove-trendbuiltduringthehousingboomof2000'sandcomparesittothesizeofthehousingbustduringthe2010's,andconcludesthatthesecondisthreetimesthesizeofthefirst.A"SalePending"signoutsideahouseinDiscoveryBay,California,U.S.,onThursday,March31,2022. (Photographer:DavidPaulMorris/BloombergviaGettyImages/GettyImages)"Ithinkthatwhilethereareplacesinwhichhousingisdefinitelybubbling,forthecountryasawholethatisreallynotthewaytobet,"DeLongwrote."Wehavebeenunderbuildingforadecadeandahalf,andthefactthathousingdemandisfinallyrevertingtonormalismakingthisunderbuildingveryvisibletous."MarkThornton,aseniorfellowandchairinAustrianEconomicsattheMisesInstitute,arguesthereis"noquestion"thattheU.S.isinahousingbubble,but"whereweareinthehousingbubbleisadifferentmatter."JPM'SDAVIDKELLY:FEDCAN'TKILLINFLATION,BUTCOULDKILLTHEECONOMY"Whenyoulookattheamountofloansgoingoutforrealestateingeneral,it'shuge,"ThorntontoldFOXBusiness."Sowheretheproblemis,andwho'sgoingtohavetopayforitareyettobedetermined."Thorntonsaysthatit'snotjusthousingweshouldbelookingat,because"we'reinaneconomywherejustabouteverythingisinabubble." "Thehousingbubblemaynotbeasimportantasitwasin2006and‘07,andcertainly2008and‘09,becausewehavebubblesinbondmarkets,stockmarkets….therearebubblesinmostassetmarketsbecausewe’vehadanextremelylongperiodofextremelylowinterestrates,"heexplained,sayingtheFederalReservehaskeptinterestratesartificiallylowfortoolong.Foreclosureshittheirlowestpointonrecordlastyear,puttingmorepressureonthelow-inventoryhousingmarket. (OrlandoSentinel/TribuneNewsServiceviaGettyImages/GettyImages)Thorntonarguesthat"we'restillinthateasy-money,easy-credittypeofeconomy,andsoIthinkpeoplearepayinglessattentiontothehousingmarket,eventhoughwedohearstoriesabouthowahousesoldfor10%morethanitwaslistedatandthattherearenoplacestobuyorrentincertaincityrealestatemarkets."Hepointedoutthatdespitesoaringprices,talkofahousingbubblewasstagnantuntilrecentlywhenhigherinterestratesturnedintohighermortgagerates.GETFOXBUSINESSONTHEGOBYCLICKINGHEREWhetherAmericaisfacingacrisisinitsrealestatemarketremainsupfordebate.Thesearingquestionis:Willhomepricesmoderatewithawhimperorcomedownwithacrash?Kushinotes,"Realestatemarketstendtomoveincycles,butnotallhousingboomsendinahousingbust."AdvertisementAdvertisementAdvertisementAdvertisement