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Real estate is hot, but it’s not in a bubble: LendingTree

Jen Rogers
·Anchor
·2 min read

Home prices are surging. The national median existing single-family home price rose 14.9% on a year-over-year basis to $315,900 in Q4 2020, according to the National Association of Realtors. That's the biggest gain in three decades.

Those gains have consumers starting to get nervous. LendingTree (TREE) recently found that 41% of Americans believe the housing market is a bubble on track to crash at some point during 2021. More than a quarter (26%) think the bubble will burst in 2022.

However, a bubble isn’t a foregone conclusion, according to LendingTree Chief Economist Tendayi Kapfidze.

Prices are up, but “there's a lot of factors that are supporting these high housing prices," he said to Yahoo Finance Live.

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Kapfidze sees three fundamentals behind this year’s post-lockdown surge.

“One is really low mortgage rates," he said. "Another one is lack of inventory. And a third one is a bit of shifting in the mix of things that people desire from their homes."

Those factors along with tighter lending standards and a government Kapfidze sees as better equipped to intervene if needed, make a market in his mind that is more resilient to a sharp decline.

A general view from a balcony of the Trump Palace luxury condominiums on Sunny Isles Beach, Florida, on May 15, 2017. More than half, 54 percent, of Miami foreign real estate buyers come from Latin America, according to the National Association of Realtors. Another 18 percent are Europeans and 13 percent Canadians. A closer look at the figures show that Canadians were the top buyers of luxury apartments in 2016, followed by Venezuelans and Brazilians. / AFP PHOTO / RHONA WISE (Photo credit should read RHONA WISE/AFP via Getty Images)
Sunny Isles Beach, Florida, on May 15, 2017 AFP PHOTO / RHONA WISE (Photo credit should read RHONA WISE/AFP via Getty Images) (RHONA WISE via Getty Images)

Micro-bubbles a possibility

Even with a tailwind of strong fundamentals and demographics, Kapfidze is not ruling out a slowdown ahead.

“I expect the housing market may not be as hot in 2021 as it was 2020,” he said. “I think certainly we will get a deceleration in home price increases. If not this year, then likely next year."

Kapfidze also hasn’t ruled out regional hotspots going bust.

“I think the possibility of micro bubbles is certainly higher than the possibility of a overall bubble within the United States," he said.

Keep an eye on areas which have seen a sharp run up in prices, but are also prone to natural disasters.

"I think South Florida also has a very kind of special risk," he said. "People are getting more and more concerned around risk of climate change."

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Jen Rogers is an anchor for Yahoo Finance Live. Follow her on Twitter @JenSaidIt.

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