The United States is heading toward a comparable situation that occurred in 2007 and resulted in the 2008 world monetary crisis – the housing market is about to crash.
According to the latest data reported by Epoch Times, the gap between average prices for homes and median incomes are widening, this was part of what caused the last housing market crash:
The U.S. economy is currently experiencing the hottest real estate market on record, the latest Realtor.com housing data show.
According to the April report from Realtor.com, the median listing price advanced 14.2 percent year-over-year to $425,000. Housing experts suggest that the typically busy spring buying season will be notably competitive.
“Despite moderating demand, the U.S. median home price hit yet another all-time high and accelerated over the March annual growth pace in April,” the real estate listings website said in a statement.
In February, house prices shot up around the country by almost 20 percent according to the most recent S&P/Case-Shiller U.S National Home Price Index data.
“The last time the U.S. real estate market recorded such exceptional growth was during the 2008 housing crisis,” noted The Epoch Times.
Another trend that is worrying economists is the home-price-to-median-household-income ratio, which reached 7.72 in January. Just before the last housing market crash, it is higher than the previous record of 7.03 which was set in November 2005.
Median income rose around 11 percent over the past ten years, while median home prices shot up 30 percent, according to a report from CNBC.
Home values have risen over 118 percent since the 1960s, but median income has only risen 15 percent.
“A household earning $75,000 to $100,000 can currently afford to buy 51% of the active housing inventory,” according to a joint report by the National Associations of Realtors and Realtor.com. “Nevertheless, that same household could afford to buy 58% of the homes for sale in 2019. Thus, during the pandemic, affordability for households in the income bracket $75,000-$100,000 dropped by 7 percentage points.”
Mortgage rates are also starting to rise, and this is going to have a huge role in what happens in the housing market.
It is estimated that the average U.S household needs to spend around one-third of its monthly income to make a house payment.
The CEO of Home LLC, Nik Shah, who works as a down payment assistance provider for homebuyers, said that the rise in mortgage rates is already pricing a sizeable portion of Americans out of the housing market altogether.
“In late 2020, the typical U.S. resident could afford to buy a home worth 48 percent more than the median-priced home in the country,” Shah told The Epoch Times. “In 2022, thanks to rising mortgage rates and home prices, that’s reduced to only 5 percent.”
Morgan Stanley notes that the elevated rates will only affect those trying to enter the housing market:
“The mortgage market is mostly fixed-rate, so raising rates won’t raise the monthly payment on current owners, but instead will disproportionately impact first-time homebuyers,” bank researchers said in a recent research note. “Robust mortgage underwriting should keep foreclosures limited, preventing the forced selling that would weigh on home prices.”
It can’t come soon enough. I was looking at home prices in Florida, and even in 55+ communities, homes that were selling for $75 a foot in 2000 we’re now over $250 a foot. Absurd. I’ll wait it out.