WASHINGTON–Is the housing market in a bubble? It’s a question being posed to many economists, and now CUNA’s chief economist has also weighed in.
Mike Schenk addresses the issue in his latest commentary on how the current real estate landscape could impact the economy.
“Are we in the midst of a housing bubble? The market does look a little bubbly right now, but the most likely scenario going forward is that things will play out with a fizz, rather than a pop,” said Schenk.
Key Takeaways
Among the other key takeaways in Schenk’s latest analysis:
- Year-over-year home price increases remain high, with 43 states seeing over 10% growth as of March 2021. Prices in eight of these states have risen 15% or more in the same period.
- Consumer indebtedness as a percentage of income has dropped below 80%, a level last seen in the mid-1990s. At the peak of the Great Recession, this was over 124%. This decline was accelerated, in part, by the COVID-19 pandemic and ensuing fiscal stimulus.
- Unlike the housing loans issued in 2004-2007, loans originated today are more consumer-friendly and going to those in better financial circumstances, with sub-prime loans making up a small percentage of the market.