The year 2008 witnessed the crash of the housing market, which rocked the economy of the United States. The current surge in real estate prices in the country is making people think that the real estate bubble would burst again. According to a survey, 58 percent Americans believe that there would be a major slowdown in the housing sector in the next couple of years.
It may sound weird, but there are also some people who are waiting for the bubble to burst so that they can buy properties at comparatively cheaper rates. A study by the UBS also suggests that even overvalued cities like San Francisco and Los Angeles are not in the grip of the bubble risk yet. Housing costs in these cities have soared uncontrollably, but the bubble risk has not reared its ugly head yet. It is to be noted that a bubble forms when the prices of properties exceed their intrinsic value because of increasing demand.
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Amongst the major US cities, San Francisco is believed to be the least unsafe. In the last six years, housing prices jumped by over 80%. Conversely, incomes have risen just about 20% in the previous decade. Los Angeles has also witnessed soaring housing prices in these 10 years, but the situation is not as bad as San Francisco’s. LA home prices haven’t reached their 2006 peak yet. Only inadequate housing is causing the hike in the process presently.
Whether there is a bubble or not, there are some experts who say that the housing market situation is still quite worrying. The increase in prices and interest rates is reducing the demand, which leads to low sales. In big US cities, affordability as well as availability of good lodging would continue to be major issues that may cause the bubble to pop in the future.
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