Are We In Housing Bubble 2.0?

The signs are worrisome.

(Image Credit: Financial Times)

The housing market in 2021 looks an awful lot like the one in 2008, except this time the market is heating up after a recession rather than causing one.

It is not uncommon to hear of double digit offers, all over asking price, submitted in just days after a house comes on the market.

What the hell is going on?

Come to find out, a hell of a lot, including the combination of

• (Still) historically low interest rates
• Pent-up, generational demand
• Rock bottom inventory levels

Let’s take a look at how these three aspects have created a roller coaster ride for home buyers.

Interest Rates Our Parents Would Kill For

Mortgage interest rates in the 1980’s were close to 20%. Today they are 2–3%

(Image Credit: St. Louis Federal Reserve, FRED)

What does that mean?

Mortgages are similar to bonds, in that as the interest rate on the debt goes up, prices go down, and vice versa.