In contrast, there is currently a huge home crisis and home builders are being very cautious about adding new supplies.
“In some cases it’s a warmer housing market than before the Great Recession,” said Anita Markoska, Jefferies’ chief economist. “But the risk of bubbling is much lower.”
Bank of America economists acknowledge that prices may fall in the short to medium term in some markets.
Nevertheless, the bank said in a recent note to clients that “there is no possibility of a hard landing” this time.
‘We have housing shortage’
Of course, Bank of America acknowledges that “bubbles are infamously difficult to detect in real time.” These only become apparent in blindness. This is what makes them bubble.
“In the end, we ran out of supplies. That’s why the market crashed,” Markoska said.
As of the end of June, there were only 1.25 million existing homes for sale. It has dropped by about 19% since a year ago. At current speeds it is seen as a balanced market equal to only 2.6 months of supply or less than half of the six months.
“We have a housing shortage. Prices are not falling because of the shortage,” said Lawrence Eun, chief economist at the National Association of Realtors.
The median price of an existing home hit a record hit of 36 363,300 in June, up 23% from the previous 12 months.
A serious-bound scene is being prevented
The good news is that there are signs that the housing market is self-correcting as a result of this remarkably high price.
New home sales have fallen at an unexpectedly weak pace since April 2020, marking the third month in a row, according to data released Monday. Existing sales fell four months in a row before a higher ching in June.
“Some buyers are simply priced,” Eun said.
“It can be a blessing in disguise,” Jefferies ’Markovska noted, noting that home prices could cool as plants grow. “This prolongs the housing cycle and prevents a boom-bust dynamic.”
Ninja loans are out of style
Another important difference between today and the mid-2000s is that the orrow has not gone out of hand, at least not yet.
“Unlike in ’08 and ’99, when there were huge wages and bad mortgage underwriting, there wasn’t much profit and mortgage underwriting,” Dimon said.
“Donors are becoming more and more accountable this time around,” said PNC chief economist Gus Futcher, referring to the large-scale industry. “We haven’t seen any documentation and no return of down payment loans. This will help prevent crashes.”
The risk of selling fire is low
Fed rate hikes today could slow the housing market by making mortgages more expensive for potential buyers. However, very few orrow borrowers will be forced to pay more for existing mortgages. This is because, according to Bank of America, only 2% of outstanding secured mortgage debt is under permanent regular mortgage. In 2006 it dropped sharply from 21%.
Homeowner balance sheets are also in a stronger place today.
This is very important because the extra lift is that the housing bubble spread out of control in the mid-2000s.
Bank of America economists write, “Lower withdrawals mean household balance sheets are in a better position to handle falling home prices.” “Therefore we are not likely to see the waves of defaulters, which resulted in the sale of fire.”