- Real-estate analysts have been warning of record home-price growth since the start of the pandemic.
- Insider asked 32 experts whether we’re in another major real-estate bubble.
- Most suggested there would not be a housing crash. Instead, many said they see the market cooling off.
While the real-estate market has historically followed a cycle that aligns with the season changes, nothing has been typical, predictable, or even rational about the United States’ housing market in the past two years.
It was anyone’s guess what would happen to global financial markets during the spring of 2020 as the coronavirus made its way around the world and turned life upside-down for millions of people. But thanks to a $2 trillion stimulus package, the US entered into one of the most dramatic bull runs in recent history. All-time highs became common on Wall Street and Main Street as money poured into investments.
But a combination of low interest rates and high demand has led the US real-estate market into territory not seen since the boom in the early to mid-2000s.
So what happens next? Will a growing real-estate bubble burst in a spectacular fashion, bringing down the rest of the economy with it? Or is demand for housing simply so high — and inflation so pervasive — that the extreme price growth over the past two years is here to stay? Will the real-estate market encounter a slowdown and a similar price correction that Wall Street has experienced this year?
To help make sense of the market, we asked 32 experts the same question: Are we in a real-estate bubble?
We, like so many others, are wondering: Are homes becoming so expensive that sale prices appear to be artificially inflated, dangerously unbalanced, unjustifiable, or some combination of these? If so, who stands to benefit or lose the most?
The group of experts — which includes esteemed economists, lenders, and investors — shared their insights about the market and offered analyzes of how it compares with previous booms and busts, as well as some predictions for what could come next.
Most said they do not believe the current market conditions signal that the country is witnessing a true real-estate bubble, while a handful said they do believe that we could see a dramatic enough decline in demand and home prices to signal a proper market correction — or worse. A few felt that it may still be too early, or too difficult, to really say. However, they overwhelmingly said they believe that the market will cool off as interest rates climb and inflation drives down the value of buyers’ cash savings.
The experts identified several themes as having a major influence on buyer behavior and market prices, including supply-chain disruptions, cheap credit and a swath of qualified buyers, a generational demographic change as millennials approach their 40s, the pandemic’s disruption of office culture and remote work, and a good old-fashioned fear of missing out.
The issue of housing affordability predates the pandemic, as many cities — particularly coastal cities — had high rents and housing costs in the years leading up to 2020. But the past two years have intensified it to a degree that many prospective millennial and Gen Z homebuyers are not only sitting out this market but starting to lose hope of ever owning a house.
Here’s what each expert thinks of the US real-estate boom — and whether the market is indicative of a bubble.