Are we in another real estate bubble?

Posted: 5/24/2017

Five years after housing prices bottomed out, cities such as Los Angeles and San Francisco have seen housing values reach the records set in 2007. Home values have recovered from the recession in wealthier areas, including near the coast or on hillsides. The median home price in LA County has hit $550,000, sparking new fears of housing affordability availability. There aren’t simply enough homes to fill the urgency of buyers who are worried loan rates will rise.

Many people are increasingly acting out of the fear that if they don’t buy a home now they’ll never be able to afford one. Economists worry that buyers are starting to stretch their budgets by borrowing money from family members and adding more co-signers to loans. A similar situation happened during the run-up before the last housing crash, but we are not seeing the mass expansion of credit. Economists are predicting a complete crash is unlikely, but some areas could go flat again or see declines.

“At some point, people simply can’t afford to buy these houses,” said Svenja Gudell, chief economist at real estate website Zillow. “What likely would happen is home-value appreciation would slow down a bit and in some areas it could be flat.”