Housing Market Bubble Concerns in 2025
Is the housing market in a bubble that’s about to burst? We take a look at the numbers in this week’s Fastest Four Minutes in Finance.
Top U.S. Cities With the Fastest Home Price Growth
Realtor.com recently published a report of the Top 10 U.S. cities with the biggest home value boom since 2019. There are some pretty incredible numbers on the list.
The top city was Knoxville, Tennessee. Home prices there have soared nearly 86% in the past 6 years. The Northwest Arkansas metro area claimed the number two spot. Homes in the Fayetteville-Springdale-Rogers area have increased 84.5% in value since 2019. Charleston, South Carolina was third at 81.3%.
Nationwide Home Price Growth Outpaces Inflation
In fact, the entire country is sharing in the price rise. Since June 2019, home prices nationally are up 57%. That’s 7.6% per year.
The fact that the Consumer Price Index is only up 3.9% per year during that same time, has led some analysts to predict that we are about experience a crash in the housing market.
Have home prices gone up too much, too quickly?
Economist Brian Wesbury’s Housing Market Outlook
According to First Trust Advisors Chief Economist Brian Wesbury, we are not going to experience a crash in the housing market, despite the doomsday predictions.
First, the current housing market is being compared with a past bubble that burst during the Great Financial Crisis. Home prices declined 27% between 2007 and 2012. Wesbury challenges that comparison. He says the key difference is we had massive over-building then, with housing starts averaging 1.9 million per year in 2002 to 2006. The average over the past five years is 1.5 million. If the supply is lower, we should expect prices to go up quicker than the average inflation rate.
Government Policies and Housing Supply Constraints
Wesbury also notes inventory is being restricted by government policy, like environmental rules, zoning, and affordability concerns. He also says government spending in general puts the pinch on home affordability. He says – quote – when government spends more than 35% of GDP, there is less left over for what workers actually want versus what the government wants us to have.
Economic Slowdown and Market Risk Considerations
Wesbury is not all sunshine and roses. He does believe economic growth is slowing, and the stock market as he says- is priced to perfection – underestimating a recession risk. But, as usual, things are never as good – or as bad as they may seem. Home prices were down .7% from January to August of this year. Adjustments like that produce ripples to the economy, not shock waves.
Bottom Line: A Housing Crash Is Unlikely
Bottom line – Wesbury says a housing collapse is highly unlikely and a collapse even greater than the last one, even more so.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
