Source: Fortune —
Fundamental economics tells us that home price growth and income growth are interwoven. Neither can outrun the other for very long. That is what’s concerning about the pandemic’s housing boom: Over the past year, home price growth (20.6%) is four times greater than income growth (4.8%).
That disconnect has more economists flirting with the most hated two words in real estate: housing bubble.
Moody’s Analytics chief economist Mark Zandi tells Fortune it’s premature to use that term. A bubble, in his mind, would require both speculation-driven price growth and overvaluation. That said, we do meet at least one element of a bubble: overvaluation. Historically speaking, Zandi says, U.S. home prices are now priced ahead of what underlying economic data (i.e. incomes) would support.
But the overvaluation, by historical comparison, varies greatly by market. The housing pandemic boom—which is now coming to an end—was hardly even, with uprooted remote workers sending home prices in markets like Austin, Boise, and Charlotte skyrocketing well above the national rate of growth.
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