San Diego, CA (PRWEB) June 20, 2014
To most appearances, the housing market has been going through a slow but steady recovery over the past year or so, which has been celebrated by many as a success. However, there are some experts that believe that this “recovery’ is not all that it is cracked up to be, and that a real estate bubble burst is on the horizon. But how likely are these predictions to actually come true? Will the housing bubble burst again this year? LoanLove.com’s new article examines the evidence presented as proof of an upcoming housing bubble burst.
This new article from Loan Love titled, “Housing Bubble Burst In 2014? (The Possibility Is Very Real)” explains, “A bubble in the housing market occurs when home prices rise at a rate well beyond the rate of inflation and the rate of increase in rental rates. In most cases, those predicting another bubble is on the horizon believe the current housing market recovery, stretching back about 18 months or so, is not a true sign of the sector’s economic outlook at all. Instead, these economists believe a so-called recovery of the housing market is being built on a false foundation.”
The main factor that the article points to as evidence of an impending real estate bubble burst in 2014 is the issue of affordability. It states that the accelerated rise in home prices is putting more pressure on those who wish to live the American dream of owning a family home. As proof of this increase, the Association of Realtors reports a jump in home prices in 119 of 164 major metropolitan areas in the final quarter of last year. While rising home prices can be seen as a sign of a prosperous real estate market, a small group of analysts point to this fact as a sign that the housing bubble is about to burst, since interest rates are supposed to continue rising to considerably higher levels through 2015. This same scenario of rising rates was present in the years leading up to the last housing bubble burst in 2008.
Aside from this, there are also other factors contributing to predictions of a new housing bubble burst. The article says, “Of additional concern is the noticeable lack of new construction starts since January 2013, levels that are not coming close to meeting demand. This lack of new construction has a ripple effect on the economy because it signals a lack of construction-related jobs as well.” It continues, “Further adding fuel to the flame, according to these analysts, is an industry dealing with stricter loan requirements. That reality has simply sent more prospective home owners toward FHA loans or even loans from non-banks, routes that typically require smaller down payments. Historically, those home buyers putting less cash into the deal have a higher percentage of defaults.”
For more information on this subject, click here to read the full article at LoanLove.com.