Thursday, March 26, 2015

Potential Housing Market Crash?

This article debates whether the housing market is on pace to crash again. The housing market is once again booming, and investors wonder if they need to be worried.  Homebuilders have been reporting solid earnings and related companies such as Home Depot and Lowes are approaching all-time highs.  There are also some housing exchange-traded funds who are at their highest point since 2007.  There has been a drastic increase in people researching estimates for their homes, which is a sign the market may becoming speculative again. 

However, mortgage rates are expected to increase, which will decrease the demand for buying houses.  Also, younger generations are trending toward living at home for longer periods of time or living on a rent basis. Banks have also tightened their credit, so there should not be another subprime meltdown.  The author concludes that he doesn’t believe there will be another crash, but it is still worth paying attention and keeping tabs on. 


http://money.cnn.com/2015/03/25/investing/housing-bubble-homebuilders/index.html

8 comments:

Nicole Blatchford said...

I personally do not feel as though there will be another crash because everyone was so hurt by the last one. I feel that after this past housing crisis, banks, homeowners, and other people have taken more and more precautions so that another housing crisis will not be as likely to occur. However, this does not mean that it is guaranteed that another housing crisis will occur, I just think it is much less likely.

Ibrahim Saeed said...

The banks and the home owners learned something very valuable the last recession -- if you can't afford a house, don't get it. Banks are not handing mortgages out like they were before, and now they will be careful about who they sell a mortgage to. HAving said that, the economy is indeed in an up-swing cycle, and there's no harm keeping an eye on housing prices. Paranoia is a good thing.

Unknown said...

Ibs raises a valid point. Lenders have been incredibly cautious to this point. I believe that this upstart in housing could be due, in part, to millennials recovering from the Great Recession. Since they were beginning to enter the work force during the crash, they were severely impacted. I believe that the lag in demand for housing will be corrected as millennials move into their own places and start families.

Unknown said...

Trepidation to prevent bubbles is probably a good thing, unless it generates a lack in confidence that stymies economic recovery and growth. A tendency against making loans that could go underwater could prevent the sort of macroeconomic crash that ran through 2007-2008. However, this dip is likely only temporary: investors will again become optimistic as they have done continually in the past and find ways to create credit and distribute credit instruments to those in high risks for the amount of debt they assume, leading to another bubble and crash cycle. The question is of when: it's doubtful that the current market will pop in the immediate future as a bubble is likely not substantial enough at present to cause any sort of sustained panic. Nonetheless, a correction may occur now or at some point in the future in response to the easing of credit and assumptions of risk.

Anonymous said...

I believe this recent influx in the housing sector is due to a lack of home production due to the harsh winter. Over this past winter the housing market was actually in a slump and home purchases and renovations missed their target by over 6%. I blame this recent influx in the housing market over a rush to finish products that were scheduled earlier but delayed due to terrible weather conditions. As for the market in general I believe that a crash is not likely in the coming months.

Unknown said...

For all of use who sometime in the next ten years are likely going to be looking for houses, it is probably a good idea to keep an eye on the housing market -- crash or not. All in all, I agree with Ibrahim that people learned from the last housing crash, making the market slower to grow as potential homeowners check and double check their ability to afford a house.

Jake Carnahan said...

I would have to agree with some of the comments above. I think that since the housing market crash new laws have been put into place to prevent the same types of things from happening. It is now harder for people to get the type of housing loans they once could. People are now made to be more accountable and can only get loans they really can afford.

Jake Carnahan said...
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