Another Housing Bubble?

There are always contrarians. We’ve had repeated statements about expected steady growth in the housing market, and we’ve watched a steady rise in housing prices. Although some experts have predicted the increase in prices will not continue at the same pace, most have agreed “upward” is the direction. Now, the bears come out of their caves, and some are cautioning buyers a bubble may be forming in the U.S. housing industry. Who’s growling these warnings?

Fear of another housing bubble

With home values on the rise , helping to heal a battered market, real estate forecasters are beginning to fear another housing bubble is looming on the horizon.

According to Bloomberg:

• Dean Baker, Co-Director, Center for Economic and Policy Research. “If prices keep going up at this rate for another six months, we will have a bubble, and people will get hurt.”

• Stan Humphries of Zillow. “The Fed has put every home on sale because of its actions… We want people to be aware of the fact that this is unusual and not bake these expectations of high appreciation into their long-term calculus.”

• Mark Vitner of Wells Fargo (noting the impact on the housing recovery of the influx of investors). “The problem is if they don’t earn a high enough return, they all walk away.”

According to the Washington Times:

• Christopher Whalen, Managing Director, Carrington Investment Services. “The recovery in housing prices seems to be disconnected from traditional economic drivers. The weak rate of participation by homeowners in the home price rebound is a concern…In a normal housing cycle, the creation of new home mortgage credit would be growing in tandem with rising home prices, but the current rebound is anything but normal.”

According to Yahoo Finance:

• Jeff Greene, President, Florida Sunshine Investments. “No doubt you can buy a house today and get a really good price and a low-interest loan, but if you want to sell that house to somebody two or three years later, and he doesn’t have a 3 percent loan, how much is he going to pay for that house?”

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