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Home price growth and construction are the hottest they’ve been since 2006 – the peak of a housing bubble. Despite the similarities of some housing data from 15 years ago to today, experts see two very different markets. Conditions driving this market boom are “fundamentally, radically different,” an economist told Insider. See more stories on Insider’s business page.
Housing data is hitting levels unseen since 2006 in at least three different ways, begging the question of whether this is another bubble. Experts say this isn’t that – it’s economics.
Another housing bubble 15 years after the last one would be very bad news, as the epic pop of that market in 2008 threatened the stability of the entire global financial system. But while today’s price inflation is similar to then, the drivers behind this market rally look different.
Nationwide home prices grew 12% year-over-year – their fastest pace since 2006 – this past February, according to the S&P CoreLogic Case-Shiller Index. Gains were broad-based, with all 20 cities tracked by the index experiencing price growth above their respective median levels.
Separately, CoreLogic’s own home-price index also recorded the highest annual leap since 2006 in February. That gauge tracks home prices across the country, while S&P’s index measures prices in 20 metropolitan areas.
Also, for the first time since 2005, the median sale price for previously owned single-family homes is higher than that for new construction. In other words, the premium Americans typically pay to be the first to live in a new house has been completely erased as homebuyers have rushed to buy any home on the market.
“The conditions underlying what happened way back then, during the bubble of ’05 and ’06, and what’s driving price growth today are just fundamentally, radically different,” Frank Nothaft, chief economist for CoreLogic, told Insider.
Where dubious lending and market euphoria powered the mid-2000s surge, today’s boom is almost entirely due to a nationwide supply shortage. The monthly supply of homes sits