![]() That sharply different regional story can be seen in the Moody’s Analytics analysis. This time around, Northeast and California markets have seen relatively milder booms-while Texas, which was largely missed by the early 2000s bubble and subsequent crash, is among the epicenters of the pandemic housing boom. While Arizona, Florida, and Nevada were also leaders during the ’00s housing boom, so were markets across the Northeast and California. ![]() During the last boom, the regional picture was fairly different. Markets across Nevada, Arizona, Idaho, Texas, Utah, North Carolina, and Florida have absolutely exploded. The pandemic housing boom has been the most pronounced in the Southwest, Southeast, and Mountain West. (To see the 40 regional housing markets most vulnerable to a price drop, go here.) home prices would fall by 5% on a year-over-year basis-while significantly "overvalued" housing markets would see, Zandi says, a 15% to 20% home price dip. Already, Zandi says, the Federal Reserve’s campaign against runaway inflation has seen the pandemic housing boom flip into a “housing correction.” For evidence, he points to spiking inventory levels and plummeting home sales.īut Zandi's prediction goes out the window if a recession does indeed manifest. In significantly "overvalued" housing markets like Boise and Phoenix, Zandi forecasts a 5% to 10% home price drop. home price growth will plummet from the record rate of 20.6% to 0%. Over the coming 12 months, Zandi predicts year-over-year U.S. Heading forward, Moody’s Analytics chief economist Mark Zandi says frothy house prices should be a drag on future home price growth. Boise and Phoenix, which were hotspots for expat Californians during the pandemic, are "overvalued" by 72% and 54%, respectively. This time around, the most "overvalued" home values are in Southwest, Mountain West, and Southeast markets that saw a flood of work-from-home workers during the pandemic. The last time that happened? During the 2000s housing bubble. While that doesn’t mean home prices are about to fall by 24.7%, it does mean that historically speaking, home prices have moved into the upper bounds of affordability. home prices are 24.7% higher than they would historically trade at given current income levels. On a national level, Moody’s Analytics finds U.S. The analysis conducted by Moody’s Analytics aimed to find out whether economic fundamentals, including local income levels, could support local home prices. (In May, Fortune looked at a similar analysis conducted by the Real Estate Initiative at Florida Atlantic University.) The analysis runs between the fourth quarter of 1992 and the first quarter of 2022. The financial intelligence firm provided this publication an exclusive look at its quarterly proprietary analysis of 414 regional U.S. To better understand where the housing market stands, at least from a historical perspective, Fortune reached out to Moody’s Analytics. home prices up 37% between March 2020 and March 2022. There’s another reason bubble talk has suddenly reemerged: The spike in mortgage rates-up from 3.2% to 6% over the past six months-means home shoppers are finally feeling the full brunt of the pandemic housing boom, which pushed U.S. ![]() Simple economic theory, which dictates that neither home prices nor incomes can outgrow the other for very long, tells us that isn’t sustainable. Why the renewed concern? Over the past year alone, home prices have gone up four times faster than incomes. Economists at the Federal Reserve Bank of Dallas put the real estate industry on edge this spring after they published a paper titled Real-Time Market Monitoring Finds Signs of Brewing U.S. Economist Robert Shiller, who predicted the last housing bubble in 2005, recently hinted that housing may be in another bubble. Fast-forward to 2022, and we’re once again hearing “housing bubble” talk. ![]()
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