The current state of America’s housing market raises a lot of questions. Professionals and users seem concerned about the Real Estate market. Housing prices are rising faster, higher than ever. Today’s situation is the result of many factors combined, but the pandemic definitely triggered the whole industry. In fact, the Covid-19 situation lasted long enough to create lifestyle changes. For example, the impact of societal behavior pushed more millennials toward homeownership and families to get a bit further from big cities.
Now, let’s take a deeper dive into what housing prices are like, and what we can expect in the coming months. Miami and its surroundings have always been more expensive than the average of Florida.
We are living through a very interesting couple of years, however, we don’t have the necessary hindsight to observe the side effects of the current potential “bubble”.
Furthermore, investors and economists have focused on other aspects of the economy, such as the supply chain disruptions as well as the ongoing labor shortage issues throughout the country.
It’s a real subject here because this has been affecting the construction of many buildings across the state. Few specialists believe that the current run-up in housing prices is a bubble that’s about to burst. Back in 2005, some local markets had been experiencing signs of froth. As a result, 2 years later, in early 2007 the subprime mortgage crisis started! Monitoring the market is therefore essential. There were many causes of the crisis, with commentators assigning different levels of blame to financial institutions, regulators,credit agencies, government housing policies, and consumers, among others. What we know now, we didn’t know back then.
But this time, economists are on alert.
The boom in building at the beginning of the 21st century has been a key factor in the previous crises. At some point, prices couldn’t go any higher, and by the start of 2007 home prices started to go down, abruptly.
The decline went as low as 26% in lost value!
Except for this period of time, within the past 20 years, prices have raised following a regular curve, consequently observing the peaks when they happen can be decisive. According to the National Association of Realtors, the median price for houses is $374,800 this year, which is quite a jump compared to the $329,500 in 2020. For the knowledge, in 2016 the median price for a home in the U.S. was $289,000.
Real Estate specialists and economists forecast a possible stabilization later on in the coming years, but only after September 2022. One thing is for sure, prices won’t decline yet. If you lived during the last housing bubble and were old enough to remember the catastrophe of what happened in the US in 2007, then you know why many economists rang alarm bells to avoid going through the same this time.
Dean Baker, senior economist has been quite reassuring and declared after attentive study that a fall of 20% to 30% is unlikely to happen. But he also added, that even the smallest rise in interest rates could affect home prices.
The main concern here, according to specialists, is that houses are overvalued, it is not sustainable. But the major difference compared to the previous home building boom is that there’s no excess inventory of housing and no high vacancy rates. We are actually witnessing the lowest vacancy rates ever. Nevertheless, the numerous buildings under construction, due to the amount of international and local investors entering the market, could cause an oversupply of homes in the future.
But it won’t necessarily aim to a collapse, it is just scary, since the damage from the last crash took years to recover from.