Posted by: Larry Stevens | April 20, 2013

Is Another Housing Bubble Brewing? Realtypin.com Author: Daniel Torelli April 19, 2013

Is Another Housing Bubble Brewing?

Realtypin.com Author: Daniel Torelli
April 19, 2013
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Is Another Housing Bubble Brewing?

Flash back to the mid-2000’s. That’s when “flipping” was all the rage, and home values were constantly getting higher and higher. However, that housing bubble couldn’t sustain itself, and eventually, the bubble burst – and took the U.S. economy with it.

Americans have been waiting for years to see some improvement in the housing market, and they finally started to get it at the end of 2012. Over the past few months, home prices have gone up, and buyers have even gotten into bidding wars to secure the home of their dreams.
But is another housing bubble being created right now?
That’s what some experts fear.
Today’s housing market is very different from the housing market of the mid-2000’s. However, the Federal Reserve’s plan to hold mortgage rates as low as possible (a plan called “Quantitative Easing”) is helping to create a strong buyer demand. That demand, coupled with a low supply of homes for sale, is causing home prices to rise faster than the experts had predicted. In fact, JPMorgan Chase & Co. just doubled its home price predictions for 2013. They now think that home prices will jump 7% by the time the year is over. Bank of America recently made a similar prediction, saying that home prices will increase 8% by the time 2013 comes to a close.
With predictions like these, it’s easy to see why investors are scooping up homes as fast as they can. In fact, Colony Capital – a large California-based investment firm – has already raised more than $2 billion to buy homes and rent them out. According to the experts at Realtypin.com, countless investors around the country have similar strategies. Their plan is to buy homes now (before prices rise even more), then sell them down the road, when prices make larger gains. In the meantime, they’ll rent out the homes in order to turn a profit.
Even though home prices are still far below the levels hit during the mid-2000’s, some experts fear that they’re growing too fast for the economy around them. After all, the nation’s unemployment rate is still close to 8%, and even the Americans who do have jobs aren’t seeing salary increases that match the pace of housing price growth. As a result, some experts are afraid that homes will become overvalued just like they did a few years ago.
A similar balloon could affect land prices. Since homebuilders have started breaking ground on more new projects recently, there is a fear that land could be in high demand – creating a “land boom” in the process.
The talk of balloons has some experts calling for the Fed to discontinue Quantitative Easing. However, there has not been official word from the Fed about discontinuing the program anytime soon.

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