Southern California real estate transactions have been hot over the past many months.
The housing market has been one of the strongest parts of the U.S. economy during the New Crown (CCA virus). But some investors and property developers, noting that millions of people have also lost their jobs during the epidemic and the recession, have seen the contrasting growth in the housing market and believe that housing prices are in a bubble today. There are some signs that the public is also panicked and worried that if anything happens, the bubble could burst.
Home loan rates have been at historic lows since the epidemic began, and the rise of teleworking has given people more flexibility in where they live. The housing market has been soaring due to a conflict between strong demand and a lack of supply.
But Jeff Greene, a real estate investor and billionaire, was quoted by CNBC as saying the current housing market is in a bubble. Greene said, “There’s too much money on corporate balance sheets and people’s balance sheets and their bank accounts, and it’s just making the prices of everything go up, but at some point, that’s bound to stop.”
Green analyzes this rise in home prices because of the key role played by strong monetary and fiscal policies in response to the epidemic. He points out that 80 percent of the reason this happened was due to excess liquidity in the economy, while only 20 percent was due to fundamentals. He points to the rising cost of lumber, which suggests serious inflation at all levels of the economy as it recovers from the crisis.
Greene shorted subprime mortgages more than a decade ago, bringing his comments to the attention of many, but he’s not the only one suggesting the housing market is overheating. According to a recent Google report, searches for “when is the housing market going to crash” jumped 2450% in the last month, and “why is the housing market so hot?” The phrase “Why is the housing market so hot?” doubled in just one week.
Chinese-American real estate developer Lee Bing Shin has also noticed the concerns of his real estate clients. He cited the example of a recent housing transaction where the buyer had raised the price to grab the house, then cancelled after the closing (escrow) because of concerns. And this house is not expensive, just $ 750,000 ordinary house.
“People know it by heart and are already worried,” he said, sensing that home buyers’ confidence is at a tipping point, saying that any windfall in this situation could cause the bubble to burst. Although the housing market looks hot, if you consider “the real economic dimension and the depreciation of the value of the dollar,” he said, “it can’t withstand any economic challenges to policy.
Li Bingxin explained, especially since February this year, real estate prices have been rising online, in fact, is presented, is the dollar deflation caused by inflation. Just among all the inflated goods, real estate is the most considerable. And inflation will definitely cause a bubble, he stressed that this is not only the problem of real estate, it will cause the whole society more disparity between rich and poor and the regime.
He stressed that this is a comprehensive bubble, not just in the real estate sector, and expects that bubble to face challenges once interest rates go back up. He analyzed, as the rich get richer and the poor get poorer, and this wave of rising prices, mainly first-time buyers and lower-middle class in buying, and when prices rise to the point that they can not afford, the rise will be interrupted. He concluded that “the high-end range is limited, and the reversion will occur at any time”.
If the bubble bursts, Li Bingxin thinks it may be worse than in 2008, because at that time it was a bad economy, the devaluation of housing prices, the economy and housing prices have synchronization, is the normal market adjustment. And this time, the price of housing prices continue to rise is quite abnormal, most likely a false impression, once the stock market and housing market bubble in full, the price difference widened, so that the lower and middle classes can not afford to buy a house, then the government will burst once there is a suppression policy.
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