2 minute read
"Rumors Spread Faster Than News..."
- Amit Abraham
A recent headline in many mainstream news outlets proclaimed the headline:
“Federal Reserve Issues Warning of “Brewing U. S. Housing Bubble”
Quite an ominous and troubling headline! Only one problem, if you read the body of the article, it doesn’t support the headline.
Here are a few excerpts:
The Federal Reserve Bank of Dallas identified signs of a “Brewing U.S. Housing Bubble” in a blog post March 29th. Though the sharp increase in home prices in itself does not indicate a bubble, the report said.
Even though the report called the current housing market “abnormal,” the authors concluded that “there is no expectation that fallout from a housing correction would be comparable to the 2007–09” crisis in terms of its magnitude.
“Household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom,” said the report, adding that market participants and regulators are better equipped with tools and early warning detectors to thwart such a crisis.
The truth is that there simply is no bubble. Certainly, market dynamics are always changing, and the real estate market may slow down one day, but the likelihood of a bubble that bursts is highly unlikely.
Further, American homeowners have seen an unprecedented growth in their home equity. The national average is 54.5% higher than just five years ago. Homeowners today are well insulated against a slowdown in the market.
Painful lessons were learned in the recession, and significant reforms were made to ensure that doesn’t happen again.
Jonathan R. Krause, President Gambino Realtors
815.282.2222 | GoGambino.com
