Nick Timiraos explains how the Federal Reserve keeping interest rates low is causing home prices to grow faster than they normally would during a recovery, and that has some experts worried.
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11 Responses to “Are Home Prices Are Rising Too Fast?”
- Chief Tomahawk says:
Saw an SFGate article recently which said one homebuyer was using an “interest-only” loan to buy. I believe that means the third “i” in Warren Buffett’s investing gameplan has been turned loose yet again. Probably only because Uncle Sam is the 4th “i”.
- jeff in indy says:
mr. barrack agrees:
- wally says:
Interesting points. The mirror image issue is that middle class incomes have not risen for many years. Eventually that plays havoc with any modern developed economy because consumer spending is the foundation of all such economies. This will become a bigger and bigger structural issue – and political issue – in the years ahead.
- wisegrowth says:
We need to keep in mind that there was an income shock to the economy by high income earners just before the end of 2012 due to a tax change. This extra income at the high income level of the economy has made its way into the stock market and the real estate market. The income to support the rise in these asset values won’t be sustained after a few months.
My view is that the economy was pushed closer to a recession because of the income shock to the economy.
I posted this explanation for you all…
- Angryman1 says:
Nope, cause prices aren’t rising that fast. Note where they are rising and where they are still falling. Classic. Eventually those areas booming will cool and those areas struggling will nominally rise at a constant rate.
- ByteMe says:
Not sure we’re in “bubble territory” again, but…
What I’m seeing is that in 2004-2007, we had a huge number of smaller investors buying up real estate, but they didn’t have the deep pockets to sustain themselves during tough times and they were overpaying for their investments. Obvious bad outcome.
Now what we’re seeing is a smaller number of deep pocketed large investors using cheap money to swoop in and buy undervalued properties and renting them. A year ago, we had no problem picking up a reasonably priced investment property; this year, we’ve tried for 7 properties so far and haven’t been able to do the deal because someone else with deeper pockets wanted to pay more than was reasonable (considering the work involved in renting properties, anything less than an 8% annual return seems stupid to me, but clearly not to someone with a huge wad of someone else’s cheap money).
So, there’s not a bubble yet… but there are definitely pockets of inefficient money out there.