What To Watch ForĪs home prices continue to rise, by the end of the year, too many prospective buyers will likely be priced out of the market, meaning demand may ease and lead to more muted price gains, CoreLogic said. “High unemployment coupled with a higher share of mortgage delinquent borrowers puts those areas at higher risk of price declines.,” he added. At the other end of the price growth spectrum, Nothaft noted that Brownsville and Beaumont in Texas – and other towns along the Gulf Coast - have been hard hit economically, not only by the pandemic, but also due to the loss of drilling and oil-extraction jobs (which started prior to the pandemic) and five hurricanes that hit the area last year. Nothaft indicated that housing in Idaho and Montana, two sparsely populated states with wide open spaces, is more affordable than housing in some west coast states, prompting an exodus of homebuyers to these areas – and thereby bidding up prices at a rapid rate in these mountain states. But McBride warns that if lending standards loosen again and “we see the practices we saw from 2004-2006, then all bets are off.” Frank Nothaft, chief economist for CoreLogic, told Forbes that subprime borrowers (who were partly to blame for the prior housing meltdown) are now “largely absent” from the mortgage market.
McBride also points out that unlike the 2006-2008 period, lending standards have greatly tightened and banks are now only lending to the most creditworthy mortgage customers, suggesting a price crash is probably not in the cards. “The rise in prices is a byproduct of a severe imbalance between supply and demand, not the ‘loosey, goosey,’ anything-goes lending that so was so prevalent in the housing bubble,” he said. McBride told Forbes that although home prices are climbing, any perceived similarities to the housing bubble and crash of 2006-2008 are yet premature.
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