FED Economists Point to Signs of Housing Bubble in US

    Photo: Reuters [via Al Jazeera]

    The Facts

    • As US home prices continue to rise to unprecedented heights, economists are starting to warn of a potential bubble in residential real estate.

    • Economists and researchers at the Federal Reserve Bank of Dallas have sounded the alarm that housing prices are increasingly "unhinged from fundamentals" like supply, demand, labor, and construction costs.

    The Spin

    Pro-establishment narrative

    The so-called "bubble" is based in large part on decades of underbuilding, which has created a growing supply shortage. Moreover, the fundamentals this time are nothing like those of the crash in 2008. Loan underwriting standards have improved since then, and household balance sheets are much healthier.

    Establishment-critical narrative

    The run-up in housing prices - not to mention rents for single-family homes - is a direct result of the entrance of private equity into residential housing markets. Pools of investment capital are driving up home prices across the country and ensuring that the American Dream is no longer a reality for most.

    Cynical narrative

    There is good reason to think that this already-inflated housing market still has a long way to run, and the majority of new mortgages will continue to go to buyers with the most means and the highest credit scores. This means that the housing market is likely to further exacerbate the growing divide between the haves and the have-nots.

    Establishment split



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