The good news, however, is that the United States is not about to repeat the 2005-07 housing boom and bust, which led to the Great Recession. Basic supply and demand factors — not speculation, predatory lending and/or bad underwriting — are driving home prices. Moreover, a series of mortgage-market safeguards should prevent a hard landing when home prices recede.
Existing home prices
were up 23.4% in June over the last year, according to the National Association of Realtors
. This price spike reflects a pandemic-induced confluence of events, and demographic factors, which drove demand for homes, following more than 15 years of housing underinvestment.
Demand for homes spiked during the pandemic as the Federal Reserve slashed interest rates to zero, driving mortgage rates down to record lows. Freddie Mac’s 30-year fixed mortgage rate
hit an all-time low of 2.65% in January
and remains historically low, at around 2.8%