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US Housing Bubble Deja Vu? Experts Sound Alarm on 2023 Market
US Housing Bubble Deja Vu? Experts Sound Alarm on 2023 Market
Sputnik International
The current state of the US property market have elicited reactions from insiders about a possible housing bubble. While a repeat of the mid-2000s collapse is deemed inconceivable, soaring prices and limited supply pose significant challenges for prospective homeowners.
2023-10-12T15:00+0000
2023-10-12T15:00+0000
2023-10-12T15:39+0000
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Sheila Bair, ex-FDIC chair (2006-2011), has raised concerns about the US housing market. Drawing from her experience during the mid-2000s housing collapse, she points to inflated house prices due to low mortgage rates, speculation, and reckless lending.The housing market in 2023 paints a picture of soaring prices, with the median home now commanding a staggering $407,100 as of August. According to the National Association of Realtors data, this figure starkly contrasts with the $278,200 recorded in August 2019.According to Bair, the surge in home prices exemplifies a classic imbalance between supply and demand. She emphasized that this trend would persist as long as there’s limited supply, and she does not anticipate any imminent price dip.Additionally, the NAR's recent report discloses that at the close of August, there were 1.1 million unsold homes, marking a substantial 14.1 percent decrease from the corresponding period in 2022.Surging home prices and high mortgage rates have made homeownership challenging for many Americans. Despite average mortgage rates reaching 7.49 percent, some cities, including Los Angeles, San Diego, Richmond, and Cincinnati, have significantly raised median home prices in 2022:Bair asserts that a reprise of the mid-2000s housing bubble collapse, precipitating a worldwide economic downturn, is unlikely. The prevailing stringent mortgage lending standards and the substantial reserve of equity amassed by homeowners serve as crucial safeguards.“I see much less speculation in the housing market today, thank goodness....Even if home prices adjust a bit, people should not be underwater,” Bair expressed.Present Condition of The US Market Causes UneaseJeremy Grantham, a prominent investor, co-founder, and chief investment strategist at GMO LLC in Boston echoes Bair's apprehensions about an impending housing bubble. Grantham cautioned about an ensuing global plummet in property prices.“Don’t invest in the US,” Grantham said. He alluded to the country's whopping $33 trillion debt profile, the excessively elevated yield rates, growing interest rates, and the problems confronting the US mortgage and real estate markets.Grantham advised investors to consider "cheaper" options for investing, like Europe, Japan, and the UK.“In general, the rest of the world seems investable,” he said. “Do your analysis, make your mistakes et cetera, but it's reasonable.”Highlighting a potential weak link in the US market, Grantham pinpointed the Russell 2000 Index. This index, comprising the smallest 2,000 stocks in the Russell 3000, commands attention as a focal point of vulnerability.This index is widely acknowledged as a key indicator of the U.S. economy, given its emphasis on the extensive network of small businesses that collectively drive the nation's economic engine.Grantham emphasized the significance of prioritizing quality over flashiness, highlighting the track record of assets like AAA bonds for stability in both bear and bull markets while also underscoring Warren Buffett's endorsement of low-debt, high-return companies like Apple.He suggested investing in global stocks offers diversification, expanded opportunities, and growth potential; options include direct purchase, ETFs like Vanguard FTSE Developed Markets or iShares MSCI Emerging Markets, or American Depository Receipts (ADRs) for simplified investing, but be aware of risks like currency fluctuations and political instability, especially for newer investors who may prefer starting with an investment app.
https://sputnikglobe.com/20230824/feds-latest-victim-us-mortgage-rates-hit-20-year-high-1112868616.html
https://sputnikglobe.com/20220414/mortgage-rates-above-5-highest-in-more-than-a-decade-1094766785.html
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sheila bair, federal deposit insurance corporation, fdic, housing bubble collapse, us housing market, mortgage rates, speculative buying, lending practices, median home price, national association of realtors, supply and demand, unsold homes, mortgage rates, los angeles, san diego, richmond, fannie mae ceo, priscilla almodovar, jeremy grantham, co-founder and chief investment strategist at boston-based gmo llc.
sheila bair, federal deposit insurance corporation, fdic, housing bubble collapse, us housing market, mortgage rates, speculative buying, lending practices, median home price, national association of realtors, supply and demand, unsold homes, mortgage rates, los angeles, san diego, richmond, fannie mae ceo, priscilla almodovar, jeremy grantham, co-founder and chief investment strategist at boston-based gmo llc.
US Housing Bubble Deja Vu? Experts Sound Alarm on 2023 Market
15:00 GMT 12.10.2023 (Updated: 15:39 GMT 12.10.2023) The current state of the US property market has elicited reactions from insiders about a possible housing bubble. While a repeat of the mid-2000s collapse is deemed inconceivable, soaring prices and limited supply pose significant challenges for prospective homeowners.
Sheila Bair, ex-FDIC chair (2006-2011), has raised concerns about the US housing market. Drawing from her experience during the mid-2000s housing collapse, she points to inflated house prices due to low mortgage rates, speculation, and reckless lending.
The housing market in 2023 paints a picture of soaring prices, with the median home now commanding a staggering $407,100 as of August. According to the National Association of Realtors data, this figure starkly contrasts with the $278,200 recorded in August 2019.
According to Bair, the surge in home prices exemplifies a classic imbalance between supply and demand. She emphasized that this trend would persist as long as there’s limited supply, and she does not anticipate any imminent price dip.
Additionally, the NAR's recent report discloses that at the close of August, there were 1.1 million unsold homes, marking a substantial 14.1 percent decrease from the corresponding period in 2022.
24 August 2023, 20:12 GMT
Surging home prices and high mortgage rates have made homeownership challenging for many Americans. Despite average mortgage rates reaching 7.49 percent, some cities, including Los Angeles, San Diego, Richmond, and Cincinnati, have significantly raised median home prices in 2022:
Los Angeles at 23.8 percent
San Diego at 18.2 percent
Cincinnati at 14.6 percent
Bair asserts that a reprise of the mid-2000s housing bubble collapse, precipitating a worldwide economic downturn, is unlikely. The prevailing stringent mortgage lending standards and the substantial reserve of equity amassed by homeowners serve as crucial safeguards.
“I see much less speculation in the housing market today, thank goodness....Even if home prices adjust a bit, people should not be underwater,” Bair expressed.
Present Condition of The US Market Causes Unease
Jeremy Grantham, a prominent investor, co-founder, and chief investment strategist at GMO LLC in Boston echoes Bair's apprehensions about an impending housing bubble. Grantham cautioned about an ensuing global plummet in property prices.
“Don’t invest in the US,” Grantham said. He alluded to the country's whopping $33 trillion debt profile, the excessively elevated yield rates, growing interest rates, and the problems confronting the US mortgage and real estate markets.
Grantham advised investors to consider "cheaper" options for investing, like Europe, Japan, and the UK.
“In general, the rest of the world seems investable,” he said. “Do your analysis, make your mistakes et cetera, but it's reasonable.”
Highlighting a potential weak link in the US market, Grantham pinpointed the Russell 2000 Index. This index, comprising the smallest 2,000 stocks in the Russell 3000, commands attention as a focal point of vulnerability.
This index is widely acknowledged as a key indicator of the U.S. economy, given its emphasis on the extensive network of small businesses that collectively drive the nation's economic engine.
Grantham emphasized the significance of prioritizing quality over flashiness, highlighting the track record of assets like AAA bonds for stability in both bear and bull markets while also underscoring Warren Buffett's endorsement of low-debt, high-return companies like Apple.
He suggested investing in global stocks offers diversification, expanded opportunities, and growth potential; options include direct purchase, ETFs like Vanguard FTSE Developed Markets or iShares MSCI Emerging Markets, or American Depository Receipts (ADRs) for simplified investing, but be aware of risks like currency fluctuations and political instability, especially for newer investors who may prefer starting with an investment app.
