How to Worry About House Prices
MCLEAN, VA--(Marketwired - May 31, 2016) - Freddie Mac (
Insight Highlights
Quote: Attributed to Sean Becketti, Chief Economist, Freddie Mac.
"House prices have breached the peak levels of 2006, raising concerns about the long-term sustainability of current price levels. The difficulty of forecasting house price appreciation and the conflicting signals of the multitude of house price metrics make it challenging to assess whether -- and where -- house price risk is indeed increasing.
"Our first stage identified ten large metro areas with unusually-high house prices relative to the household incomes in those areas. However, the second stage failed to produce compelling evidence of increasing house price risk. As long as leverage remains low, home owners will remain resilient in the face of economic fluctuations. However, if leverage creeps up, home owners' financial cushion will shrink, leaving them more vulnerable to economic shocks. In sum, our analysis suggests that, aside from isolated areas, we don't need to worry about house prices -- yet."
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is the largest source of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.