US Housing Market Outlook:
- There’s a lot of chatter among market participants about the state of the US housing market, which has seen its strongest run of price growth since 2006 – right before the US housing bubble burst, which helped lead to the Global Financial Crisis.
- Supply chain issues (e.g. closed sawmills) have helped lift lumber prices to all-time highs, leading to over a $35K increase in new home prices in the US since the start of 2021.
- Low mortgages have kept measures of housing affordability within reason, but US Treasury Secretary Janet Yellen’s warning this week about higher interest rates are a stark warning.
Concerns About US Housing Market, Overheating Economy
There’s a lot of chatter among market participants about the state of the US housing market, which has seen its strongest run of price growth since 2006 – right before the last US housing bubble burst, which helped lead to the Global Financial Crisis. Concerns were heightened this week after US Treasury Secretary Janet Yellen said that “it may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat” when discussing the potential impact of US President Joe Biden’s latest stimulus bill.
Google Trends “Housing Bubble” (May 2011 to May 2021) (Chart 1)
This isn’t just a concern from policymakers. Everyday Americans are taking notice of the state of the US housing market too. In fact, Google searches for the term “housing bubble” are approaching their highest level over the past ten years. The big questions for traders and investors alike are thus: will the Fed’s regime of low rates continue to entice homebuyers as mortgage rates remain historically low? Or will rising costs sideline buyers – and finally take air out of the recent US housing price bubble?
