CNN Money posted an interesting article on their website that discusses whether or not we should all be worried another housing bubble – one that will inevitably pop. Hopefully the answer to that question is no, but it is still an important topic to consider nonetheless.
The housing market has really come back to life over the past couple of years, and as all of you reading this article can most likely attest to, it is pretty nuts out there. Sellers are obviously loving the fact that they are receiving multiple offers at or above list price (in most markets), but buyers are wishing there was some sort of relief out there in terms of the fierce competition.
Buyers and sellers aren’t the only groups with strong feelings about the market, as big home builders like Lennar and KB Homes are seeing solid earnings. Not to mention home-improvement giants like Home Depot and Lowes, as well as paint manufacturers, furniture retailers, and many more home-related businesses.
Yes, times may be good right now, but when it comes to keeping an eye out for potential “bubble-inducing” warning signs, many experts are quick to point out a few things:
- Indicators in the stock market – When looking at two key housing exchange-traded funds – the iShares U.S. Home Construction (ITB) and SPDR S&P Homebuilders (XHB) ETFs – both of them are now at their highest levels since early 2007.
- Speculation – Some experts point to the fact of consumers becoming ever more reliant upon speculative numbers, such as the dreaded Zillow “zestimate”. Speculation is a big part of what went wrong in the past.
- Mortgage rates – Mortgage rates have started to increase and will likely go higher once the Federal Reserve finally starts to hike interest rates. At the very least, this would signal an end to the refi boom.
- Oil prices – Other experts bring up the fact that oil prices have plunged, which could hurt demand for housing in markets with close ties to the energy industry.
While these “warning signs” might not be the things nightmares are made of, they are still worth keeping an eye on. Even if they don’t contribute to another bubble bursting, at the very least they should eventually cause things to even out a bit and find more of an equilibrium.