- House prices can be out of sync with market fundamentals when there is widespread belief that the current robust price increases will continue
- An analysis by housing giant Freddie Mac suggests that the housing shortage has increased 52% from 2.5 million in 2018 to 3.8 million in 2020
- In the past one month, mortgage rates have continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions.
America's real estate market may be showing signs of a housing bubble as prices become “unhinged from fundamentals,” according to the authors of a blog post published by the Dallas Federal Reserve Bank.
House prices can fall out of sync with market fundamentals like supply and demand when there is a widespread belief that prices will keep climbing.
“If many buyers share this belief, purchases arising from a ‘fear of missing out’ can drive up prices and heighten expectations of strong house-price gains," according to the researchers.
Swapna Venugopal Ramaswamy | USA Today