This recent CNN Money article (link here) reports on rising housing prices and issues present in the housing market today. The report states that the housing market, in general, has been getting better since 2013, however, lack of confidence in the market due to the crisis is putting a damper on potential growth. The issue seems to be that there are plenty of first-time home buyers looking to purchase, but there is a lack of available homes because "homeowners who would be considering selling could still be underwater or still in too low of an equity position." The article also says that current homeowners are likely waiting for the value of their property to continue to rise so that they can earn back what they lost in the previous market bubble burst. Additionally, in the aftermath of the crisis, builders aren't building houses due to the uncertainty of the market and lenders aren't lending. So the issue with the market this time around is that their is real demand backed by real money, but there is very limited inventory to feed the demand, which is driving up the price of houses.
So all of this could lead to the building up of another housing market bubble, but one of a different kind. I think that if somehow confidence could be restored to builders and homeowners and they began to build and sell houses and increase the supply to meet the demand, a bubble would be avoided and we would see a healthy growth in the housing market? What do you think? Do you think it's plausible for confidence to be restored?
I do not think that the confidence in the housing market can be restored in the near future since the crisis was so recent. Furthermore, I do not think that the housing supply will meet the housing demand soon because of the strict bank lending practices and the slow rate at which new houses are being made. Overall, I am uncertain as to how the confidence of producers/sellers can be restored in this industry; thus, I am interested in what others have to say on the topic.
ReplyDeleteI do not think the housing market is healthy enough for a bubble to present itself. While there may be demand due to a low number of sellers, there should be ample housing based on the high building rates before the crisis. I think that the main concern is that the housing may not be as preferable as the buyers would like.
ReplyDeleteI agree with both Nolan and Veeral on the fact that it's too soon for another housing bubble giving that the housing market has not fully recovered from the last bubble. As Veeral, I also think that supply will not meet demand anytime soon in the housing market due to the strict lending activities.
ReplyDeleteI don't see a housing market bubble happening this shortly after the crisis. If the housing demand stays steady while prices continue to rise the people that have been holding on to property waiting for the market to come back would be incentivized to sell; matching supply and demand bringing some stability to the price.
ReplyDeleteI don't see a major bubble emerging either, however, it could be a small one. Although asset bubbles can be created by a supply shortage, it doesn't seem drastic enough to cause such a large bubble prior to the crash in 2007. However, minor asset bubbles are formed all the time and it seems the market is headed for a correction. As prices continue to rise home building firms may use this opportunity to build more homes, or homeowners may be able to sell their houses at a price high enough to get out from under it.
ReplyDeleteI agree with everyone thinking above that it seems unlikely that confidence in the market will be restored any time soon. This makes me skeptical about the formation of another housing bubble. I do agree with Alex though that a small bubble could be forming that will correct itself without the repercussions being serious.
ReplyDeleteI agree with others above that the confidence in the housing market will not be restored in the short-term and will take some time. I find it hard for another housing bubble to take this quickly after the crisis due to the lack of confidence in the market. I agree with Nolan that the major issue is for home buyers who are going into a market that is still feeling the shocks of the crisis. By having lenders and home builders, not lending as well as building is creating a difficult time for home buyers because of the lack of confidence within that market.
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