Housing Bubble 2.0 | Return Of Last War

Summary

Financial media commentary in recent years acknowledges the existence of one or more asset bubbles, but repeatedly excludes housing real estate. The relatively recent real estate bubble that led to the Great Financial Crisis (GFC) in 2008 is often cited as a reason to exclude housing from the list of overvalued assets; however, this exclusion is incorrect, outdated, or both.

Key Points

• Financial analysts, believing the GFC will not be repeated, exclude housing from the list of overvalued assets, despite evidence of bubble valuations in 20+ metropolitan areas.
• These metropolitan areas are experiencing bubble valuations that vastly exceed the Great Financial Crisis Housing Bubble in 2008.
• The trend in house prices compared to incomes over the last 50 years illustrates the severity of housing bubble 2.0, with the average house price now 7 times the median income, compared to 1.2 times in 1970.
• The housing shortage in the United States may be exacerbated by high house prices, which are likely a key contributor to the shortage