Why the real estate market is soaring in the United States
Audio 03:25
In one year, the US real estate market has gained 10%.
Here in Manchester, New Hampshire in December 2020 © AP - Charles Krupa
By: Dominique Baillard Follow
8 mins
In the United States, the real estate market, like that of stocks or bitcoin, is experiencing a phenomenal rise in prices.
Is a bubble forming, can it burst?
Both buyers and sellers are increasingly worried about it.
Publicity
“When is the real estate market going to collapse?
It became one of the most frequently asked questions last month on Google's US page.
Americans may still remember the last housing crisis twelve years ago.
Millions of households suddenly found themselves unable to repay their loans.
Ruined, they were evicted from their homes.
The collapse of the real estate market was the first symptom of the great recession that followed the subprime
mortgage crisis
.
The current rise in prices revives this painful memory.
In one year, the American real estate market has gained 10%
Unheard of since 2006. In some cities, the increase is + 25%.
More than four in ten sales are above the advertised price.
The highest bidder wins the sale.
As if we were buying at auction.
For billionaire Jeff Green, who had bet against
subprime
, there is no doubt that a bubble is forming in real estate.
And like on Wall Street, it is fed by the rivers of money injected by the Federal Reserve.
Interest rates are at their lowest, these super advantageous conditions explain, according to him, 80% of the soaring market.
The conditions for granting loans are much stricter than before 2008
This time it is not the laxity of the banks that is fueling the increase. The borrowers are creditworthy. This is why other real estate experts are much more reserved about the reality of the bubble. They look at the fundamentals of the market. If prices are soaring, it is because there is a very real imbalance between supply and demand. The supply is two times less than last year. Because of the lockdown, many owners have delayed the sale to respect social distancing. Containment and teleworking are also increasing demand. Americans leave their city apartments to buy in the countryside or in the suburbs. The context of the pandemic is increasing the pressure on a chronically deficit market due to the lack of sufficient construction of new housing. In L'immediately this building crisis is not ready to subside. The sector is also facing shortages of wood and other materials.
So is the real estate bubble imaginary?
No one today is so categorical.
A bubble is formed first because the prices go up, and then because this rise exhilarates investors who begin to believe that it is lasting, even eternal.
This is why the phenomenon is self-sustaining.
Today in the United States, it's not just real estate that has its head in the clouds.
This is also the case for Nasdaq, bitcoin and dogecoin, a new cryptocurrency that is all the rage.
All these boiling markets attract speculators, whether they are professionals or private individuals.
The central bank has indicated that rates will not rise until 2023, enough to fuel their frenzied hike for at least two more years.
In short
► Netflix won the Oscar ceremony.
With 36 nominations for 17 films, he left with 7 trophies.
The online video service has nearly doubled the number of awards it has received since entering the American Film Contest.
Disney comes in second with 5 Oscars.
► Americans who have received a vaccine should be allowed to travel to Europe this summer.
This is what
Ursula Von der Leyen, president of the European Commission,
told the
New York Times
.
Provided of course that there is no new wave of coronavirus.
It will be a recommendation from the Commission, each Member State must decide whether or not they want to implement it.
Newsletter
Receive all international news directly in your mailbox
I subscribe
Follow all the international news by downloading the RFI application
google-play-badge_FR
Economy
United States
Housing