Is There Another Housing Bubble Round the Corner?

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bubble cleaningYes, you read it right. Surprising as it may seem, there are quite a few industry experts who are predicting a housing bubble. Yes, everyone is aware that the market has very favorable conditions right now. Home sales are going strong thanks to the low mortgage rates and the improved job economy. But despite this, there are rumors that the next housing bubble might strike. Considering the booming market, from where did this spring up? The answer lies in home prices.

For quite a while, home prices have taken an upsurge and are now increasing in many areas. In fact, a survey has identified over a dozen housing markets that are characterized by prices higher than the average, and Houston is included in this list.

Though some experts have forecasted a housing bubble, there are some who believe otherwise. These economists feel that the worries are not that significant right now. This behavior and opinion has caused the people who think a housing bubble might strike to be even more confident of their predictions. After all, the last time this happened, the situation was very similar to what it is right now.

A reputed economics professional stated that expectations are increasing and it is true, that they have not yet reached the phase that might cause a housing bubble. However, if things progress at the same rate, it would not be surprising if this happened. The professionals also added that the pricing bubble could be attributed more to psychology than economics. He explained this by saying that a bubble can be regarded a ‘social epidemic of enthusiasm’ that is very contagious. It is easily spread by word of mouth, media and even the prices. As the prices increase, the media uses the opportunity to grab attention and release likewise stories.

This is exactly what happened over a decade ago when the country first saw a jump in the housing prices. Even at that time, the situation was regarded as favorable but a few economists released warnings and advised a correction in prices. Their warnings became justified when the entire housing market plunged and home values fell by 40%, and in some areas, at even greater rates.

Considering this year, the prices have already risen by 12%, and if they continue to rise, who knows, history might just repeat itself.


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