With home prices expected to appreciate by over 5% this year, some are beginning to worry about a new housing bubble forming. Warren Buffet addressed this issue last week in an article by Fortune Magazine. He simply explained:
Later, when questioned whether real estate and/or mortgaging could present the same challenges for the economy as they did in 2008, Buffet said:
What factors are driving home prices up?
It is easily explained by the theory of supply and demand. There is a lack of housing inventory for sale while demand for that inventory is very strong. According to a recent survey of agents by the National Association of Realtors (NAR), buyer traffic was seen as either “strong” or “very strong” in 44 of the 50 states (the exceptions being: Alaska, Wyoming, North Dakota, West Virginia, Connecticut and Delaware).
Also, in NAR’s latest Pending Home Sales Report, it was revealed that the index was the highest it has been in a year.
What does the future bring?
As prices rise, more families will have increased equity in their homes which will enable them to put their home on the market. As more listings come to market, price increases should slow to more normal levels.
Anand Nallathambi, President & CEO of CoreLogic, recently addressed the issue: