![]() ![]() ![]() 4 Fortune cover story called “Is This House Worth $1.2 Million?” On the cover, under the headline “Is Real Estate Next?,” we ran an ominous rendering of a house poised to tumble from a jagged cliff. The last bubbleīelieve it or not, I first claimed danger ahead in 2002, in a Nov. So let’s review how the past frenzy built early on, and examine why the metrics that looked so dangerous then are now pointing in a different direction. Today, the measures I used to predict the last crash seem to be approaching similarly inflated levels right now, the phenomenon that triggered the Dallas Fed’s red alert. Look for their prices to lag today’s raging inflation, or even fall.īelieve me, I’m always reluctant to say, “This time it’s different.” When traditionally reliable metrics point to a fall, it usually happens. And since these cities don’t benefit from the huge influx to America’s Southern tier, they are unsustainably expensive. Still, it’s clear that a number of metros such as San Francisco, Denver, and Washington, D.C., which were always pricey, got more expensive. Though it will inevitably slow, the appreciation in those cities should both preserve their gains and keep national prices increasing modestly once the current spike subsides. But even after that escalation, the monthly costs in owning in such hot metros as Jacksonville, Charlotte, and North Port, Fla., will remain modest by national standards. As Pinto points out, outsize gains are practically guaranteed for the rest of 2022 he’s predicting that prices in March 2023 will be 15% to 17% higher than today’s for the nation as a whole. “You might call it ‘the great housing arbitrage,’” says Ed Pinto, former chief credit officer at Fannie Mae and director of the American Enterprise Institute’s Housing Center. The home-office economy has unshackled families to leave high-cost metros on the coasts and flock to super-affordable Sunbelt cities, greatly boosting their markets. Most of all, what’s new is the freedom to work from virtually anywhere you’d like to live and can afford a house. It’s a whole new set of fundamentals, encompassing rising but still relatively favorable mortgage rates, record low inventories, homeowners benefiting from modest leverage, and baby boomers’ hankering for keeping the big family colonial instead of downsizing to a condo or townhouse. Unlike the dynamics governing the last ramp-up, the driving force isn’t wild speculation. ![]() Today, my take is a lot more favorable than that of the Dallas Fed’s economists. To predict that a steep descent was at hand, near what turned out to be almost the market top, I deployed metrics similar to the ones the Dallas Fed cited to make its dire assessment, and more or less got the forecast right, down to the approximate percentage drops that actually occurred nationwide and in numerous metros. But this writer feels a duty to express his own view, for a simple reason: As far as I know, I was the first journalist to call the last housing bubble. At first glance, it sure looks like another craze is building. ![]()
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