Friday, May 9, 2025

Higher Interest Rates Could Burst America’s Housing Bubble

America’s real estate market is headed for turbulent times this year, as the Federal Reserve prepares to tackle out-of-control inflation as early as March.

According to senior economist at the American Enterprise Institute and former IMF deputy director Desmond Lachman, the US housing bubble could burst this year if the Fed begins raising interest rates come March. With the federal government buying up a significant amount of bonds all throughout last year, the resulting equity price bubble has led to “equity valuations at levels only seen once before in the last hundred years.”

As such, once adjusted for inflation, real estate prices are sitting at the highest in 15 years, before the last housing collapse. “Those bubbles in the equity and the housing markets, they’ve been premised on the assumption that interest rates would stay low forever. So, as soon as the Fed starts raising interest rates in an aggressive way, there’s the real risk that it bursts the asset price bubbles and that could, then, move us into a recession,” Lachman warned.

The last time the US underwent a major housing market crash was in 2008, during which the economy succumbed to the Great Recession. The bursting of the housing bubble and subsequent stock market collapse were the result of extraordinary growth across the subprime mortgage market, as mortgage loans were made available to Americans with subpar credit scores.


Information for this briefing was found via Nikkei Asia. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

Endeavour Mining Q1 Earnings: Cash Flow Is King

G Mining Oko West Feasibility: Move Fast, Break.. Nothing?

New Gold Q1 Earnings: What’s Behind The Market’s Surprising Reaction?

Recommended

First Majestic Posts Record Cash Flows In Q1 As Production Costs Fall

Brazil Potash Secures Funding In Support Of US$2.5 Billion Autozales Project

Related News

US Pending Home Sales Plummet By Most on Record

The US housing market is in trouble: despite new home sales doing better than expected,...

Friday, December 30, 2022, 11:21:00 AM

US Households Now Spend 30% of Their Income on Rent, the Highest in 20 Years

Soaring mortgage rates are keeping United States households from buying their own houses and are...

Monday, January 23, 2023, 06:22:00 AM

Are Home Prices Up Because People Want Bigger Houses?

The surge in home prices over the past several decades is often attributed to various...

Monday, September 25, 2023, 02:14:00 PM

Jeff Bezos Wants to Be Your Landlord, Backs New Fund that Acquires Single-Family Homes in the US

It’s always interesting to see how billionaires think of ways to control more of the...

Friday, December 8, 2023, 06:40:00 AM

Is US Housing Heading For A Crash As FHA Ends Pandemic-Era Protections?

The US housing market may be shifting once again as federal agencies phase out pandemic-era...

Wednesday, April 16, 2025, 10:03:00 AM