By: Dr. Lynn Reaser
With housing prices rising at a double-digit pace, such as in San Diego, along with multiple bids, the housing market is starting to look a little frothy. Are we headed for another bubble?
For now, the housing market is still in its early stages of recovery. A slowly healing job market, a dramatic improvement in affordability due to lower home prices and interest rates, and a shift in the economics toward ownership versus renting have boosted demand. Meanwhile, inventories of homes for sale are being constrained by the reluctance of homeowners to put their homes on the market along with a still low level of new homebuilding.
Another bubble could certainly develop within a few years, particularly if the Federal Reserve is too slow in withdrawing its aggressive easing and in raising interest rates.
Although we usually say, “never again”, housing will probably always be vulnerable to cycles, especially in California.
Image Credit: http://www.sdhomedatabase.com/home/