DC Comic’s fictional planet htraE (Earth spelled backwards) is the setting for the Bizarro World, a land most recently popularized by Seinfeld, where the Bizarro Code dictates everything be remade as the opposite of what it should be. It is quickly becoming a logical setting for the U.S. housing market.
Case in point: the following two articles:
US house prices rise at 5.7% in January – BBC (3/29/16)
Wait, what? What kind of wacko housing market is this? History can be a convenient crutch to make generalizations about economic and market activity, but just as a precedent wasn’t readily available when the U.S. housing market recently imploded, I believe one does not exist for what we are on the cusp of.
A weak economy would usually result in lower house prices but now I hypothesize that the weaker the economy were to get, the potential exists for dramatically higher real estate prices. Yes, higher. Inversely, if the economy were to expand, risk-taking would likely expand, luring home building and an an expansion of the housing supply, which could help alleviate housing inflation.
Over two years ago, I wrote a blog post here on See It Market about the potential for a bifurcated housing market. I detailed what I thought could be a split of the housing market into two very distinct markets (the existing real estate market and new home construction)… and how a housing price bubble could evolve due to extreme supply constraints.
Keep an eye on how policy makers deal with this as housing affordability issues are bound to make headlines. Thanks for reading.
Any opinions expressed herein are solely those of the author and do not in any way represent the view or opinions of any other person or entity.