IS IT TIME TO WORRY ABOUT HOUSE PRICES? BY SEAN BECKETTI VICE PRESIDENT & CHEIF ECONOMIST, FREDDIE MAC
In 2011, house prices started recovering from the Great Recession. For the first few years, rapid house price appreciation was welcome news. Homeowners regained lost equity, the number of underwater borrowers shrank and delinquencies and defaults fell. More recently though, surging house prices have led some to worry about the potential for another house price bubble. Recently, house prices finally topped their 2006 peaks and growth has been
How can we tell when we should be worried about rising house prices? There is no foolproof technique, but there are methods that provide useful guidance. We employ a two-stage method approach. The first stage compares the prices of recent sales to household incomes to pinpoint areas that merit further scrutiny. The second stage checks whether additional indicators suggest that house prices in the highlighted areas are headed for a fall in the future. So far, these indicators suggest that it’s not time to worry about house prices—yet.
About Sean Becketti, Ph.D
As chief economist, Sean Becketti leads a team that forecasts mortgage and housing market trends and conducts analysis and research on economic and policy issues affecting Freddie Mac. Becketti joined Freddie Mac from Flagstar Bank, where he was senior vice president and head of modeling and analytics. Becketti holds master’s and Ph.D. degrees from Stanford University and a bachelor’s degree from University of California – Santa Cruz.
particularly strong in recent years, averaging 5.6 percent annually.
LEVERAGE OF THE U.S. HOUSING MARKET Outstanding mortgage debt Home Owner’s equity
Source: Federal Reserve Board
ATTOM Data Solutions • P7
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