The COVID-19 Housing Boom: Is a 2007–2009-Type Crisis on the Horizon?

Diamando Afxentiou, Peter Harris () and Paul Kutasovic
Additional contact information
Diamando Afxentiou: School of Management, New York Institute of Technology, 1855 Broadway, New York, NY 10023, USA
Peter Harris: School of Management, New York Institute of Technology, 1855 Broadway, New York, NY 10023, USA
Paul Kutasovic: School of Management, New York Institute of Technology, 1855 Broadway, New York, NY 10023, USA

JRFM, 2022, vol. 15, issue 8, 1-22

Abstract: While the current housing market remains relatively strong, with housing prices setting records, concerns are growing of a potential housing bubble similar to that of 2007–2009; this paper compares the current housing market environment with that of 2007–2009 and concludes that the many of the factors that caused the 2007–2009 crisis do not exist today. Factors associated with subprime mortgages, poor and non-existent underwriting loan requirements, weak regulatory oversight, exaggerated credit ratings, under-capitalization in the banking sector and excessive speculative activity in the housing market have been addressed by regulation, which is aimed at preventing another financial crisis similar to 2007–2009. Equally important, major fundamental factors affecting real estate valuation are providing support for the housing market and housing prices; these factors are impacting both the demand and supply side of the housing market. The factors include the lack of inventories of homes available for sale, the underproduction of housing, decreased household mobility limiting supply and the increase in housing demand from millennials and institutional investors; these fundamental factors were not evident during the 2007–2009 period. Despite a number of indicators signaling a potential topping out and overvaluation of housing prices, the authors conclude that the fundamental factors will limit the extent that the housing market weakens over the next few years.

Keywords: COVID-19 housing market; housing bubble; 2007–2009 housing crisis; subprime mortgages; Dodd–Frank; Basel III Accord (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/1911-8074/15/8/371/pdf (application/pdf)
https://www.mdpi.com/1911-8074/15/8/371/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:15:y:2022:i:8:p:371-:d:894729

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().