Is the U.S. in another housing bubble?

The average U.S. house price is the highest it’s ever been – even higher than during the peak of the subprime mortgage crisis. House prices experienced a 19.1% jumped between 2020 and 2021, the largest single year increase since 1992. These worrying statistics have economists and the public questioning ‘Are we in another Bubble?’.


There were two clear spikes in housing prices: one in the years leading up to the 2008 financial crisis, and an even more dramatic rise since the onset of the pandemic. The shift to working at home due to COVID-19 heavily influenced an increase in house prices and demand. In 2020, similar to the financial crisis of 2008, quantitative easing was proposed and the federal funds rate in the United States was sharply reduced to 0.05% in April.

In 2020, U.S. household debt totalled $14.6 trillion, the largest type being mortgage debt, nearly hitting the peak of the 2008 financial crisis. Compared to the early 2000s, mortgage products available in 2020 had better regulatory safeguards. This, together with tightened lending rules, strengthened the housing market today and making it more resilient. The quantity of delinquent loans spiked to 8.22% in 2022, just one percent off its peak during the subprime mortgage crisis. Policy actions such the Coronavirus Assistance, Relief, and Economic Security (CARES) Act and fiscal relief reduced this to 3.45% as of 2022. While during the Great Recession declining property prices meant that families had negative equity and were therefore more at danger of foreclosure, loan forbearance agreements surged to a high of 8.55% for mortgages during June 2020 enabling borrowers with equity in their home to escape foreclosures.

The economic policy response from the government introducing financial support due to the COIVD-19 pandemic has prevented many consumers from falling delinquent on their loan payments and causing a more serious financial crisis like subprime mortgage crisis. 


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