#Housing bubble drivers#
#Housing bubble full#

Over the coming years, new home construction kept falling until bottoming out at 478,000 in April 2009.

At the height in 2006, monthly new housing starts peaked at 2.3 million. housing crash saw homebuilding go into a decade-long slump. It’s understandable that the ongoing construction and housing booms have so many U.S. The fact that home shoppers far outnumber homes for sale gives buyers little choice but to engage in bidding wars.

#Housing bubble drivers#

Of course, the lack of inventory has been among the major drivers of the ongoing housing boom. Simply put: Zillow researchers think if homebuilders reduce production out of housing crash fears, it could keep inventory levels suppressed. If they trim their construction plans out of caution, we will miss out on one of the best hopes we have for net new inventory on the market, and the inventory crunch that’s helped push prices up will persist for longer than expected,” write the Zillow researchers. Builders have been firing on all cylinders, and with more homes under construction than any time since 1973, they understandably feel exposed in the event of a housing downturn. “The expectation of another crash could contribute to keeping homes so unaffordable. They also argue that housing bubble fears are actually making matters worse and could drive home prices even higher. On Monday, Zillow published a paper declaring that we are not inching toward a housing bubble or crash. That's something economists at Zillow have been researching. A housing market that has become detached from economic fundamentals also has more economists posing the bubble question: Are we staring down another 2008-like housing bust? That disconnect has many in the real estate industry on edge. While the hot labor market has put upward pressure on incomes-with private sector wages up 4.8% over the past year-it isn't rising fast enough to account for the uptick in home prices. For perspective, home prices have risen on average 4.6% per year since 1987. home prices have soared 34.4%-including 19.8% over the past 12 months.

'We are not under the belief that home prices only go up…Our forecast calls for a modest drop in housing prices.Historically speaking, the ongoing housing boom is an anomaly.

#Housing bubble full#

I think there’s full awareness that in some markets, an increase in inventory may hit at a bad time-a time where demand has notably pulled back,' Ali Wolf, chief economist at Zonda, tells Fortune. 'Housing is believed to be structurally undersupplied, but we run the risk of finding more homes on the market than buyers in the near term due to cyclical factors. If that happens, it would put downward pressure on home prices. In their view, there's a chance all those spec homes under construction could see markets like Atlanta, Austin, and Dallas get oversupplied in 2023. In the eyes of housing bears, firms like Zillow are underestimating the possibility of oversupply. Price growth will slow/flatten (when compared to the breakneck start of the year), but the lack of supply is a fundamental pressure that will keep values aloft,' Will Lemke, Zillow's spokesperson, tells Fortune. 'Our economists have been chiming in on this for a bit now: The market is slowing down, but homes aren’t getting cheaper anytime soon. There's another reason some firms refuse to get bearish on home prices: a historic undersupply of homes. Back in 2007, mortgage debt service payments accounted for 7.2% of U.S. Not to mention, homeowners are less debt-burdened this time around. Why do some industry insiders think home price declines are unlikely? For starters, the country eliminated some of the loose lending practices that sank the market a decade ago. Meanwhile, modest home price declines are currently being forecast by John Burns Real Estate Consulting, Capital Economics, Zelman & Associates, and Zonda. That's according to forecast models produced by the Mortgage Bankers Association, Fannie Mae, Freddie Mac, CoreLogic, and Zillow. Over the coming year, home prices are expected to rise. While Shiller thinks a double-digit decline in home prices is possible, many in the industry don't agree.

If home prices don't plummet, it isn't a housing bubble. But we still don't have the third element: a bursting bubble.