DALLAS–U.S. home prices have soared to new heights and they keep on climbing, and some researchers and economists are now saying they have seen signs of a housing bubble brewing.
The question of whether there is a housing bubble in place has been debated in numerous credit union forums, with CU leaders, economists and other analysts taking stands on both sides.
But in a new blog post written by researchers and economists at the Federal Reserve Bank of Dallas the authors say home prices are rising faster than market forces would indicate they should and are becoming "unhinged from fundamentals.”
After looking at housing markets across the U.S., the Fed researchers said new evidence is emerging of a bubble.
"Our evidence points to abnormal U.S. housing market behavior for the first time since the boom of the early 2000s," the researchers wrote. "Reasons for concern are clear in certain economic indicators ... which show signs that 2021 house prices appear increasingly out of step with fundamentals."
Scars Remain
CNN noted that many Americans are still scarred by the last housing crash in 2007, which was fueled by cheap credit and lax lending standards that resulted in millions of homeowners owing more on their homes than they are worth. But this time economists said they are worried about a different scenario, according to the report.
“Just because home prices are rising wildly does not always mean housing is in a bubble. And there are lots of reasons why home prices have risen steadily over the past decade and shot up even more significantly in the past two years, including supply and demand imbalances in the market, rising labor and construction costs and how high or low the interest rate are for a mortgage,” the researchers pointed out, CNN said in its analysis.
FOMO on Homes
The researchers said prices may be rising to a point they call “exuberance,” in which prices become increasingly out of sync with the economic fundamentals underpinning the market.
CNN noted one possible reason cited by the researchers is buyers may believe prices will continue to climb and fear they will miss out on snagging a lower price on a home now and get stuck paying more later.
The researchers said they do not anticipate any type of correction as severe as that of 2006-07.