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Housing Bubble?

According to Warren Buffet:  “There is no housing bubble”

May 5,  2016.  With nationwide home prices expected to appreciate by more than 5% this year, questions are arising about  the possibility of a new housing bubble forming. Warren Buffet addressed this issue last week in an article by Fortune Magazine…

“I don’t see a nationwide bubble in real estate right now at all.”

He went on to say that housing won’t be the cause of the next financial crisis.

Later, when questioned whether real estate and/or mortgaging could present the same challenges for the economy as they did in 2008, Buffet said:  “I don’t think we will have a repeat of that.”


What factors are driving home prices up?

As is often the case, this is explained by the theory of supply and demand. There is very simply a lack of housing inventory available for purchase while demand for that inventory is continuing to be strong. According to a recent survey of agents by the National Association of Realtors (NAR), buyer traffic was seen as either “strong” or “very strong” in 44 of the 50 states with the only exceptions being in Alaska, Wyoming, North Dakota, West Virginia, Connecticut and Delaware.

Also, in NAR’s latest Pending Home Sales Report, it was revealed that the index was the highest it has been in a year.


What will the future hold?

As prices rise, more families will have increased equity in their homes which will enable them to put their home on the market. As more listings come to market, price increases should slow to more normal levels.

Anand Nallathambi, President & CEO of CoreLogic, elaborated on the issue:

“Home price gains have clearly been a driving force in building positive equity for homeowners. Longer term, we anticipate a better balance of supply and demand in many markets which will help sustain healthy & affordable home values into the future.”