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IPFS News Link • Housing

Housing Hubris: Can Home Prices Spiral upward Forever?

• https://www.lewrockwell.com, By Douglas French

Now, it truly doesn't, with cryptocurrency prices gyrating 24/7/365. This frantic activity has spread to other asset markets.

Once real estate was stable and slow moving. Buyers would walk through a home, and walk it again with someone they trusted, before making an offer. But, as Francesca Mari titles his lengthy New York Times Magazine article, "In Austin and cities round the country, the crazy real estate market has forced regular people to act like speculators." He wonders, "Will home buying ever be 'normal' again?"

Mari's piece chronicles the trials and tribulations of millennials (who are now the largest generation) simply trying to buy a home. In some cases, the offers are made long distance on the basis of images from their computer screens. Nationwide home prices have soared nearly 25 percent. But, where the jobs are, in medium-size metropolitan areas such as Boise, Phoenix, Austin, and Salt Lake City, prices have soared 46 percent, 36 percent, 35 percent, and 33 percent, respectively.

Amena Sengal and her husband, Drew, did what 63 percent of North American home buyers in 2020 did, making offers on homes they had never visited. Covid has forced buyers to speed up. The flood of millennials demanding homes is facing a supply shortage of 3.8 million housing units according to Fannie Mae and Freddie Mac. Plus, there are investors, who are buying one of every six homes, to compete against.

Followers of the Austrian school are likely saying, "This is a repeat of 2008. Low interest rates lead to malinvestment, and this boom will lead to bust again." However, there are no cheap, easy-to-qualify-for loans to fuel this boom. Mortgage rates are low, but the loans are hard to obtain. And builders are being stingy with supply and in some cases building neighborhoods that will be entirely rental homes.


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