Are we heading towards another housing bubble? See what the experts think.

Today's outlook for the housing market for the rest of 2022 is one-word deceleration. Real estate research firms from CoreLogic to Fannie Mae believe that house price growth is about to slow. But keep in mind price deceleration is not declining prices it just means house prices are going up at a more moderate rate.

The more alarming scenario is if spiking mortgage rates do not rain in the run-up of home prices, we could see ourselves going into a housing market that reaches dangerous levels. Home prices on an annual basis are climbing about 20%, which is five times greater than the income growth. If that continues, we could see ourselves in a housing bubble. At the onset of the COVID-19 recession the federal reserve immediately pushed rates lower.

Mortgage rates fall to a historic low of around 2.6% on 30-year loans and throughout the pandemic, that’s acted as a buffer for homebuyers who have seen prices soar. getting In those lower rates, help them to absorb those higher home prices. But now, over the first three months of 2022, mortgage rates have spiked over 1.5% points and that’s adding about $400 to the typical new mortgage. What that does in the short term is a lot of homebuyers are rushing into the market to try to buy a home before rates went up, so that made this spring market even hotter, but on the tail end and what we’re looking at this summer is an affordability pinch, where buyers should get priced out of the market, some borrowers will lose their mortgage eligibility and will have fewer buyers.

When it comes to material costs builders are not having an easy time. They’re seeing delays and surcharges for everything from windows to concrete to appliances. And of course, everyone knows the lumber that hasn’t been eased up yet, but if the economy starts to grow at a little slower rate and some of the supply chain issues are fixed, that should give a little bit of an ease up in the rate of growth for new home races, but don’t expect builders to pass on those savings to buyers. It’s just a factor it's going to slow down the growth of prices.

Real estate research firms, and housing economists are very certain that they don’t see us heading to a housing crash right now. They believe that the rising mortgage rates should be a healthy thing. It should help to slow down the unsustainable levels of growth in the housing market. They don’t believe that we’ve necessarily reached a level where we are anything close to a 2008 housing bubble, but they believe right now we need to see the market slow down, so we don’t reach any crisis level.