Blog Article: Another Housing Bubble here in the US?
Experts seem to agree that the US is headed to another housing bubble. What they do not agree on, is why. When asked if his easy Mortgage Rocket App was making mortgages too easy, Quicken Loans CEO, Jay Farner warns that mortgage originations are flat, and there are fewer mortgages given today than in 2012.
Yet, housing purchase prices are shooting up, and the explanations vary. The first explanation is that today’s purchase money is coming from unconventional sources. More investors are entering the market, many, hoping to buy and flip – resell the home within 12 months for a substantial profit. So even though less homebuyers are able to purchase homes, the prices keep rising. Ironically, the rising prices caused by earlier waves of home flippers, is attracting a whole new wave of home flip hopefuls.
Another factor in the rising home prices is the lack of available homes for sale. According to housing research firm Zelman & Associates quoted on businessinsider.com, “When [new home] prices started rising in 2013, 60 percent of homebuilders said they were intentionally slowing the pace of sales to maximize prices.” Mom and pop construction firms have given way to larger corporate construction firms, who prefer higher margin expensive houses in large developments instead of the single home construction of the past.
Housing Analyst, Mark Hanson argues that though it is impossible to know when home prices will revert to normal values, “once one pillar of the unconventional capital,” (such as institutional investors who aren’t getting the returns they expected), “leave the market, other capital will flee with along with it as prices fall.” When that happens, the housing bubble here in the US will burst…again. And investors from large corporations to individuals buying extra homes to become landlords, will suffer from the crash.
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