It's largely low interest rates I think. People can't afford to buy a home to any greater degree than they used to. However, they can afford to buy debt to a greater degree, which they use to finance the home purchase.
So people aren't really able to afford houses, just debt they then use to buy houses.
That's fine if property values go up or stay the same, but if interest rates rise new buyers (or mortgage renewers) can't afford as much debt, can't pay the current market prices, and the market prices therefore fall.
Any dramatic increase in the interest rate would result in a bubble pop IMO. It's the low price of debt that's keeping the market humming.
And now that I think about it, the stage may be setting for a crash. If Trump's presidency ushers in an Era of crazy private sector spending in the US, the result could be a dramatic rise in interest rates to cool spending and encourage saving. Of course, that's the US, but still...
Mind you, I'm no economist, and have no idea what I'm talking about.
|