The growing demand is putting pressure on the tight supply in the property market and with this home prices are rising.
If compared to the home prices in the same month last year, home prices in August of this year are almost 7 percent higher based on a report produced by CoreLogic. According to CNBC, that is a bigger annual gain than May and June and other reports have also reflected the same data.
Analysts at Capital Economics have compared August's annual gain to a 4.8 percent increase in February and they have noted that, "It is clear that house price growth has picked up recently." They added, "Indeed, with the months' supply of homes close to a 10-year low, if anything, both CoreLogic and Case-Shiller are reporting slower growth than might be expected."
Given this current scenario, some are concerned that the housing market is in a bubble that is far worse than the one experienced in 2006. According to CNBC, housing has become far less affordable than it was before. The factors that are driving housing prices up is not due to end-user demand but rather lack of additional structures, artificial low interest rates, and institutional and foreign all-cash buyers.
Housing analyst Mark Hanson reportedly has attributed the current housing market trend to upsurge of institutional and foreign buyers since 2012 who bought up distressed and lower-priced homes and new construction with cash.
On the other hand, California-based real estate analyst John Burns of John Burns Real Estate Consulting believes otherwise. He finds Hanson's premise ridiculous and says that you cannot "compare affordability today to the heady days of the housing boom when anyone could get a loan with no money down and artificial rates", according to CNBC. He pointed out on FHA Loans in which all you had to do was prove your income. He believes that home prices have increased in part by artificially low rates and that we should be concerned by the rising mortgage prices.
