Properties. Signs that predict the bursting of the housing bubble in the United States

2007 is remembered as the year of the real estate boom in the United States, so much so that the phrase “2007 bubble” is used to name it.. Although these values ​​seemed unbeatable, the coupling of some of the variables made possible another exceptional situation that began to become evident in 2021 and appears to have been consolidated in 2022, but The situation gives indications of the dangers.

The value that real estate reached between 2020 and 2021, well above the maximum reached in the 2007 bubble, is a clear expression of how inflated the US market is today.

today, Business assets (offices, industries, retail, multi-family, hotels), averaged 52.8% over 2007 and increased further in the last year – on average – 16.1% annually.

For its part, housing exceeded the maximum reached in the 2007 bubble by 55% and also reached an annual variance of 16.8% in 2021.

This phenomenon occurred due to the fall in interest rates in 2019, which led to a wave of investments, which, combined with the effects of the epidemic (in some way “forced” savings) and massive currency issuance (25% of total circulation), generated an extraordinary influx of capital.

Purchasing power with low rates has caused real estate boom With assets growing annually at an extraordinary rate: much higher than the previous bubble.

In addition, recent data reveal that residential real estate recorded a Sales prices increased year-over-year as of March 2022 by 20.9% in the United States and 31.4% annually in Florida. Given the current price rally, it is very likely that there will be a brake on higher market values ​​and even a possible price correction.

Just as when prices go down, real estate goes up, due to greater buying intent due to accessibility to users and greater attractiveness due to increased profitability for investors.

When prices are rising, real estate prices usually fall due to the need for a higher yield to compete with other options, such as Treasuries, whose yield has risen between 2 and 3 percent annually, and is expected to continue increasing in the coming months.

It is clear that price increases are a price correcting variable. Those of us who dedicate ourselves to analyzing market cycles are aware of the indications that warn that the bubble could burst at any time, although it is important to note that on this occasion there are other forces acting as a counterweight and they are stopping. , at least for the time being, correcting prices. Some of them: high inflation, increases in construction costs, strong demand from buyers, low inventory levels, excess liquidity and fear that rates will continue to rise, among other variables.

If we review recent data we see that Some indicators are starting to show signs of cooling in the market, as stocks were reduced only 3% in April, while 17% of sellers, in the same month, lowered their prices so that they could sell: In any case, the sales volume recorded an annual decrease of 4.5% in April and 15% compared to the previous month, i.e. March.

Finally, The course is in the final stage of expansion.

We are closer to the correction That the rallies are continuing, and if they continue to be in the short term, we understand that the correction will be heterogeneous and will, as always, affect some asset sectors more than others.

It is time to leave, because when everyone wants to leave, there will be no place at the door for everyone to pass through.

* The author of the note is the CEO of Inmsa Real Estate Investments

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