The bifurcated housing market in America has gone through a microcosm of uneven growth ever since the Great Recession happened. By the start of 2017, all signs were clear that there were stress indicators in both low end and high-end markets courtesy of the dwindling inventory and premium prices that later forced potential homeowners into becoming involuntary renters.
Since the housing bubble that happened in 2007, there had been a hard push to get the market back to its feet, and this seemed to bear fruit for about seven years. In the housing bubble 2017, the housing market was already on its fastest tear. This is especially so considering the number of permits that were being issued for construction. These were already the red signs that had been witnessed during the Great Recession.
Notably, the peak was attained courtesy of lax credit that led to an expanding number of purchases that were realized after prices soared beyond the standard at that home. It would also be noted that at this time, loan terms for individuals looking to buy a house were already being relaxed. Interestingly, the minimum credit scores were being dropped as self-employment documentation went low. It was also at this time that Trump was looking to strip back in the hope of getting banks to issue more loans through his order to review Dodd-Frank.
By the start of 2017, the race to the top in housing was already picking up but all the signs pointed to a peak being reached. For instance, the January purchases for homes that were already in the market had picked up to a pace that had not been realized since 2007. This was notable as the number of new home sales went up a whopping 3.7% within one month. This was in addition to the fact that there had been a 7.1% median price increase for US homes at the same time in 2016. It would be noted that in the first few months of 2017, houses in the US would remain in the market for up to 50 days and this was the same indicator for the bubble that happened in 2007.
It would be noted that since 1999, the US has been faced with a shortage of inventory in the real estate. By the start of 2017, bidding wars were already on in cities like San Francisco, and Seattle where houses would sell for more than their listed prices. This is the irrational exuberance that would later come to haunt the housing market.
The Trump Factor
With a real estate mogul president at the helm, the US was expected to experience a boom in the market. However, it would later become counter-intuitive that he would later cause a housing bubble courtesy of his stands and orders on the same. It would be noted that high-priced homes were already on a slump in some of the main metropolitan areas, some immigration restrictions from President Trump meant a negative impact on the mid and lower segments of the housing market. This would later work to throw them under the bus too. This was a blow to both the single-family market and the double family market.
Then there was also the deportation threat from the president that affected both the targets and their associates. Even those who were not targeted for deportation were forced to reschedule their plans of owning a home and would otherwise opt to rent for the fear that the worst could happen. With this reluctance from potential home buyers to enter into long term residential plans, the housing market went into distress.
Extent
Even with all the indications of a serious housing bubble, most economists believed that this was not a nationwide phenomenon per se but rather a collection of a few local bubbles. However, by this time, there was an indication that the experiences and effects seen ten years earlier was on a repeat and would add up to an aggregate bubble.
As much as there were notable low-interest rates and relaxed lending standards, there was very little price appreciation in most parts of the country during this period. Paradoxically though, even as the housing bubble crushed some metropolitan areas like Atlanta and Denver experienced high foreclosure rates. This seemed to be the case even though there was not much notable appreciation in these areas in the first place and thus, were not seen to be contributing to the national housing bubble.
Side Effects
Before the housing bubble 2017, construction of new homes was at their peak and most of the leading home builders experienced their highest revenues yet. There was also some notable mortgage equity withdrawal before and during this time. Notably, homeowners would spend about two-thirds of their equity on home improvement, personal consumption, and credit card debt.
It would also be noted that the housing bubble, forcing many residents to migrate from expensive residential areas and metropolitan centers. These residents were fleeing from the increasing price gradients and this would later result in the growth of exurbs in some areas. On the other hand, the housing bubble would later lead to extreme differences in terms of land prices in various regions. It would be noted that house prices have a direct effect on land prices and vice versa. This total overhaul would later see some of the fastest-growing regions like Atlanta Georgia slow down in terms of its demand for land.
The housing bubble 2017 also affected some homeowners health-wise as those who experienced foreclosures fell ill and had to deal with the anxiety that came with the turn of events. Apart from effects on health, the instability of the housing market also led to increased cases of violence as the fear of homes being taken away gripped most homeowners. The last two years have however seen some market correction taking place and there seem to be some light at the end of the tunnel after all. It will not be a matter of time as the market awaits a total overhaul and better prospects for the future.