Zillow: Are we in a housing bubble? Economists say no, as prices remain high

Zillow reports the hot housing market is not a bubble, according to economists.
Zillow reports the hot housing market is not a bubble, according to economists.(stellalevi via canva)
Published: Jun. 7, 2022 at 8:54 PM CDT|Updated: Jun. 7, 2022 at 8:58 PM CDT
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(Gray News) - A recent survey from a panel of housing experts and economists reveals they do not believe the market is in a bubble.

Zillow, an American tech real estate marketplace company, reports it surveyed the panel about their opinions on the state of the housing market, future growth, inflation forecasts and recession risks.

The company polled over 100 experts and of those surveyed, 60% said they do not believe the U.S. housing market is currently in a bubble, compared to 32% who think the country is in a bubble, while 8% said they were not sure.

“Americans have seen home values rise at record rates over the past few years. But although a recession is looking more and more likely, the housing market today is a far different beast than what we saw in the mid-2000s,” Zillow economist Nicole Bachaud said. “Unlike in 2006, this market is underpinned by strong fundamentals and has been built on mortgages with sound credit, factors that won’t change in the near term.”

The most popular reason for respondents rebuffing the bubble thesis was strong market fundamentals, including demographics, scarce inventory and shifting housing preferences, according to Zillow.

Low credit risks as a justification followed due to sound loan underwriting and the overwhelming share of fixed-rate, fully amortized mortgages.

Another large group of respondents rejected the term “bubble,” which implies a subsequent crash that they do not believe is imminent.

Among those who believe we’re in a bubble, unaffordable prices in the absence of record-low mortgage rates were their rationale.

Zillow said the panel might not essentially believe the housing market is in a bubble, but the group did foresee a recession coming soon.

The Federal Reserve is working to balance between reducing rampant inflation and avoiding a recession. And those polled by Zillow said they were skeptical that a “soft landing” would be achieved, as 56% of respondents do not expect the Feds to reduce inflation while averting a recession.

The most significant of the panel (45%) expects the next U.S. recession to begin in 2023.

“With home values at record-high levels and a vast majority of experts projecting additional price increases this year and beyond, home prices and expectations remain buoyant. Even among those panelists who believe the U.S. housing market is now a bubble, most expect it to gradually deflate, not suddenly burst,” Pulsenomics founder Terry Loebs said.

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