MBM:
The latest Case-Shiller data shows that house prices are accelerating at the fastest rate since June 2014. What does the recent surge in house prices mean for the market?
SELMA HEPP:
The recent surge in home prices reflects a convergence of several factors that even on their own could drive home prices higher but are now amplified in combination with each other. Hence, the home price acceleration picked up pace in recent months.
The surge also means that despite the economic challenges brought on by the pandemic, there is strong demand for home ownership, even more so than before the pandemic, one could argue. The surge also highlights the imbalance in the housing market from extended period of slow new construction and demographic tailwind which was accelerated by the pandemic.
Lastly, I also think it brings to light economic gains that were accumulated by the longest economic expansion which ended with the pandemic, and which were reflected in heightened demand for second/vacation homes across the country.
MBM:
Will house prices level off at some point this year?
SELMA HEPP:
Home price growth is likely to take a breather in the coming months. According to CoreLogic HPI forecast, home price growth will slow to 2.5 percent by the latter part of next year but will still remain positive. Still, there are variations in expectations as some metro areas have been harder hit by the pandemic.
MBM:
How long do you think interest rates will stay this low?
SELMA HEPP:
We do expect the mortgage rates to remain below 3 percent thru the end of 2021.
MBM:
Are we headed for a housing bubble? Are there any similarities between now and 2008?
SELMA HEPP:
We are unlikely to be heading into a housing bubble though some of the housing markets that were negatively impacted by the pandemic and/or job losses related to local industries (such as Texas markets dependent on oil/mining) may see a slight home price correction over the next year.