Friday, October 29, 2021

Home Price Bubble - Again

 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.

Credit Conditions Very Easy 

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.


  1. laugh... if U.S. housing market is a bubble, what is China's?

    we need a completely new term for it.....

  2. Can’t say I know much about the subject, but some data I saw indicate that real, inflation adjusted prices are up about 20% in the last 15. years. If correct, it’s not a price bubble… but it may be a quantity bubble.


      if you look at this chart and you think of the last video (below) talking about overpriced New York real estate, you get some feeling for the huge reality gulf between China and the rest of the world... =)