During the 2000s, one of the biggest signs of a frothy, overinflated bubble in the housing market was bidding wars. Potential homeowners would attempt to outbid their rivals in an effort to capture what they believed was valuable land and a home. If you thought this trend had ended with the real estate meltdown a few years ago then you are mistaken.
The Wall Street Journal wrote this week that bidding wars are making a comeback in various cities across the United States, particularly in Denver, San Francisco and Seattle. However, the newspaper cites the paucity of homes for sale rather than easy money like it was in the 2000s thanks tothen-Federal Reserve Chair Alan Greenspan.
According to data from the National Association of Realtors (NAR), the inventory of homes for sale reached 2.3 million in May, which would be on the market for just five months. If the real estate market was genuinely health then it would be on the market for seven months.
What’s happening? Some of the issues had to deal with the apprehension among current homeowners to sell their houses. They’re concerned they won’t find another home, they won’t be able to afford the costs of selling a home and they won’t qualify for a new mortgage. Also, the lack of housing construction is another big factor.
Many, including Greenspan, concede that the real estate market has yet to bottom down, despite the supposed evidence of the housing market rebounding. Greenspan predicts “secular stagnation” for years to come. Of course, this is the same guy that said there was no bubble in the first place.
“Although a bubble in home prices for the nation as a whole does not appear likely, there does appear to be, at a minimum, signs of froth in some local markets, where home prices seem to have risen to unsustainable levels,” Greenspan told the Joint Economic Committee of Congress in 2005.
With the government easing back on mortgage conditions and guaranteeing loans again, the U.S. could be in for another bumpy ride. And, similar to the many causes of the Great Recession, it will be because of the real estate market.
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