Strong Home Sales Raise Concern About a New Housing Bubble

Home sales and prices continued to climb in May, raising the prospect of a brand-new housing bubble unless there is a substantial rise in house construction.

“The house price growth is too fast, and only additional supply from new homebuilding can moderate future price development,” said Lawrence Yun, the chief economist for the National Association of Realtors. He stated there has to be a 50 % boost in home building.

The mean home price jumped 8 % from the previous month to $208,000, according to NAR. While month-to-month cost swings are not uncommon, the year-over-year rise is now 15 %, and rates are at levels last seen in the summer of 2008, simply prior to the bursting of the housing bubble.

May marked the 15th straight month of annual price increases, the first time that took place since May 2006.

House prices have actually been driven greater partly by a drop in repossessions. Only 18 % of house sales in the month were supposed troubled sales, which typically sell at a price cut to market prices. A year ago 25 % of sales were troubled sales.

Overall sales rose 4 % from April and 13 % from a year previously to an annual rate of 5.18 million houses in the month.

There are differences in between this run-up in prices and the real estate bubble that preceded the monetary crisis, said Gary Thomas, the Realtors’ head of state.

“The advancement period was marked by easy credit and overbuilding, however today we have tight home loan credit and extensive shortages of houses for sale,” he said. The improved housing market and home loan rates still near record lows, regardless of a current rise in rates, is pulling purchasers back in the market much faster than it’s prompting sellers to put houses on the marketplace. Purchaser traffic 29 % above a year back, but the supply of houses for sale is in fact down 10 %.

That’s triggered the houses of sell far more rapidly– only 41 days on the market usually in May, about a month much faster than a year ago, with nearly half the houses being sold in less than a month.

The cautions about prices increasing too fast were a stark change from the Realtors’ position during the heyday of the housing bubble, when the statement from officials usually applauded the stable increase in costs.

Your Turn To Talk