The Great Credit Bubble of 2006-08 was inextricably linked to the housing market, which saw prices spike to unsustainable levels. Credit became so widely available and cheap that house “flipping” became so common that even strippers in Florida got into the act. How about now?
Charts speak loudly.
1. House prices have spiked 20% in just one year
2. Houses are now just as unaffordable vs. income as at the top of the 2006-08 bubble.
3. The reason is simple: the Fed has printed so much money and driven interest rates so low that mortgages are available for a song to anyone who can fog a mirror. Credit conditions are very loose AND interest rates are at record low.
ARM Mortgage Rates At Record Low
Summing up: easy and cheap credit are sending house prices soaring. BUT - and this is key - the fundamental measure of house pricing, the un-affordability of houses versus household income, is back to all time bubble highs.
Record high prices, easy credit and near zero interest rates. Yes, we are in a house price bubble.