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Latest Housing Boom Sparks Big Question: When Will It End?


Not long ago, this country had a massive housing crash that helped usher in a financial crisis. But home prices have rebounded big time. In fact, right now we're seeing one of the biggest housing booms in U.S. history. Planet Money's Greg Rosalsky has this story.

GREG ROSALSKY, BYLINE: It's a picture-perfect day in early May. Real estate agent Kathleen Galano shows her client, Janet Schneck, a brick duplex on a tree-lined street in Fort Monmouth, N.J.

KATHLEEN GALANO: Janet, look at the view.

JANET SCHNECK: I know. That is key. And all the trees - this is very nice.

ROSALSKY: The two check out a remodeled kitchen, a master bedroom with a walk-in closet and a pretty backyard. They take extra time to inspect the fireplace.

GALANO: Everybody wants a fireplace.

SCHNECK: It just adds charm, and it's good in the winter - Irish coffees and a fireplace.


SCHNECK: Can't get better than that.

ROSALSKY: Janet and her husband have lived in Monmouth County since 1997. Now in their 50s, they're empty-nesters.

SCHNECK: My daughter currently lives in Austin, Texas. And my son is a first lieutenant in the Army.

ROSALSKY: This isn't the first time Janet and her family have worked with Kathleen. She's helped them every time they've bought or sold a home.

SCHNECK: Kathleen has been my agent the whole way. Yes.

GALANO: Every single time, yes.

ROSALSKY: Kathleen, also in her 50s, used to work on Wall Street. And after having kids, she got into the real estate business back in 2003. That was right in the heart of the biggest housing boom in American history.

GALANO: When I began my career, it was right on the upswing. Then, of course, the whole bust came, and then the market just slid down. As a real estate agent, you just have to learn how to navigate a buyer's market versus a seller's market.

ROSALSKY: And right now it's clearly good to be selling a house. Since home prices hit their bottom after the crash, we've seen one of the biggest housing booms in U.S. history.

SKYLAR OLSEN: In the U.S., since 2012, home values have increased over 50%. That's a huge increase.

ROSALSKY: That's Skylar Olsen, the director of economic research at Zillow. She says this increase in home values has been driven by an explosion in demand. This demand has been fueled by low interest rates, an improving economy.

OLSEN: And also just a very, very significantly sized demographic wave of people entering their early 30s.

ROSALSKY: In other words, millennials are now starting to buy their first homes, so demand has surged. What about supply? Olsen says not so much. One reason, she says, is that many baby boomers aren't downsizing and selling their homes to these millennials. The other - housing construction has been slow.

OLSEN: So we're not building very quickly at all, despite, you know, this demand boom.

ROSALSKY: Prices have now climbed all the way back up to around their historical peaks before the housing crash, which raises the question, are we in another bubble? Olsen doesn't think so. She says this boom isn't like the last one.

OLSEN: The previous bubble was driven by excess credit.

ROSALSKY: Remember those things called subprime mortgages, where banks gave big loans to people who couldn't pay them back? This current boom isn't driven by that.

OLSEN: This price dynamic is driven more by fundamentals.

ROSALSKY: Meaning lots of eager buyers and not enough homes for sale - this boom has already ended in places like San Jose, San Francisco and Seattle, which have all seen home prices fall over the last year. There it's ending not with a pop and a crash but with a gentle deflation. Olsen believes that's a good sign for everywhere else.

But I also spoke with Robert Shiller. He's a Nobel Prize-winning behavioral economist at Yale. And he's famous for predicting both the dot-com and housing crashes last decade. Is he concerned that this is a bubble?

ROBERT SHILLER: I think we should be concerned.

ROSALSKY: Shiller says look back at history. All those past housing booms...

SHILLER: They all came to an end.

ROSALSKY: His research shows that over the long run, home prices don't increase very much once you factor in inflation. They go up, but they always come back down. And with the housing market already showing signs of weakness, he says, another turning point could already be here.

Greg Rosalsky, NPR News.


Since 2018, Greg Rosalsky has been a writer and reporter at NPR's Planet Money.