99 Economic Problems, but A HOUSING MELTDOWN Ain’t One Don’t look for high housing prices to tumble anytime soon. It’s not a bubble. | By Garrett Baldwin
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he average price of single-family homes has increased for 40 consecutive quarters, and the Federal Reserve is hiking interest rates to curb inflation. It’s a combination that many fear will lead to a housing crisis. “Another housing bubble?” asks Fortune magazine.“We’re skating close to one,” warns a Realtor.com economist. “Signs of a housing bubble are brewing,” declares CNN. Luckbox doesn’t agree. The housing sector has solid fundamentals, and stock in some construction companies is trading for less than the sum of their parts. Let’s look at how the economists at the Dallas Federal Reserve Bank view the situation.
THE VIEW FROM DALLAS
The sizable gain in house prices over the last two years doesn’t constitute a bubble, according to Dallas Fed President Robert Kaplan and his team. They noted in a March 29 blog post that “shifts in disposable income, the cost of credit and access to it, supply disruptions, and rising labor and raw construction materials costs are the economic reasons for sustained real house-price gains.” Despite higher costs in the “3 Ls” of housing—land, labor and lumber—the Dallas Fed said it did not foresee a correction that would
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A 1,623-square-foot, three-bedroom, two-bath single-family home with a two-car garage located in Brandenton, Florida, has an asking price of $499,000.
“ SHIFTS IN DISPOSABLE INCOME, THE COST OF CREDIT AND ACCESS TO IT, SUPPLY DISRUPTIONS, AND RISING LABOR AND RAW CONSTRUCTION MATERIALS COSTS ARE THE ECONOMIC REASONS FOR SUSTAINED REAL HOUSE-PRICE GAINS.” — The Dallas Federal Reserve Bank
Luckbox | July 2022
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