At the moment everything looks normal in the housing market even if the real economy is tanking and millions of people have already lost their jobs. Everything has been kept afloat by the Federal Reserve because they have been pumping trillions of dollars into the economy and this has kept the economy afloat so far. However, this free money cannot be pumped into the system forever; very soon the government will stop issuing the stimulus packages and this will be the point where the real economy will play out. What we have now is just a system that has been artificially kept afloat and when the reality finally catches up with us, many will be up for a big surprise.
If you look at what is happening right now in the housing market, it is very clear that things are not normal. The average price of a house in the United States is beyond the range in which average Americans can afford. The prices of houses have been increasing at a higher rate than the increase in average incomes. This is largely due to the increased speculation in the housing market by the investors who have turned houses to speculative assets. As a result, the housing market is imbalanced and at in the coming months experts are warning that we will have a major housing market crash. The idea of owning a house has turned out to be a myth because people with average incomes can no longer afford to by an average priced house. We have overpriced homes and this is the reason why many Americans still cannot afford to buy a house and instead they prefer to rent. At the moment we have a very big imbalance between the state of the real economy and the pricing level in the housing market.
We are in the verge of the housing market collapse and with the current economic downturn, anything can trigger the beginning of the market crash. Maybe the auto loan default or credit card debt default is what will trigger a historic housing market crisis. Usually, we always have a domino effect in the economy and this means that if one section of the economy is not doing well, then other economic sectors are also affected. At the moment, the housing market is the most vulnerable market in the US economy and right now, any imbalance in the economy will be more than enough to trigger a housing market crisis. With a lot happening in the economy, it is very clear that the collapse of the housing market is inevitable; it will finally happen.
Because the FED is continuously pumping money, asset prices will continue increasing but the catch is that this will not happen for long. The real economy is tanking, people are losing their incomes and debt levels are continuously going up. This will be finally reflected in the housing market and it will not end well. Wages cannot catch up with the rising asset prices and what we have now is the housing bubble 2.0. Very soon this bubble will burst and once again millions of average Americans will lose their houses because of foreclosures and others will see a drop in the value of houses they bought for hundreds of thousands of dollars. As the economy recovers from the outbreak, the housing bubble will burst and this will further negatively affect millions of Americans. We are at a tipping point and at this point a housing market crash is inevitable.
Check out our website for more economic news: https://www.epiceconomist.com