Has the pandemic property bubble STILL not burst? Average house price increased to over $400,000 in July – after economist predicted crash won’t come until 2026

Home prices surged above $400,000 in July, new data shows, easing fears of an impending house price crash.

According to the National Association of Realtors (NAR), the median home sale price rose to $406,700 last month — up 1.9 percent from a year earlier.

Property prices typically rise when there is strong demand from buyers, but skyrocketing mortgage rates have led many homeowners to choose to stay in place, leading to chronically low real estate inventory.

According to the NAR, there was only 3.3 months of available homes on the market as of July.

This is well below the four- to six-month supply typically required to fully meet buyer demand.

Home prices have remained high due to a perfect storm of low inventories and high mortgage rates, scaring away would-be movers.

Last facts A report released today by government lender Freddie Mac shows that the average interest rate on a 30-year mortgage has risen to 7.18 percent. This time last year, the average was 5.66 percent.

But many people closed a 30-year deal when interest rates were around 2 percent — meaning any move would increase their monthly mortgage payments.

A recent survey by Freddie Mac found that 82 percent of homebuyers felt “trapped” in their home.

Data from the Atlanta Federal Reserve shows that since 2006, homebuyers have faced the least affordable housing market – with affordability dropping below levels seen during the peak of the housing bubble leading up to the 2008 financial crisis.

The Atlanta Fed uses home prices, mortgage rates and median incomes to calculate an “affordability” score each month.

The latest figures, from June 2023, show that the score has dropped to 69.5 – almost 40 points lower than in June 2020.

But despite the alarm bells ringing about an imminent house price crash, one expert emphasizes that there is no need to panic yet: real estate will continue to rise in value until 2026 before falling in value.

Economist Fred Harrison is a pioneer of the “18-year house price cycle theory,” which claims that a crash doesn’t happen until eighteen years after the last crash started.

In his book The Power in the Land, published in 1983, Harrison correctly predicted that real estate prices would peak in 1989 and the recession that followed.

In 2005, he published Boom Bust: House Price, Banking and the Depression of 2010, in which he successfully predicted the house price spike in 2007 and the subsequent crash.

His most recent book We Are Rent claims that prices will peak in 2026 before a recession that will overshadow the events of 2008.

The British economist insists the global housing market is “synchronised” and that Britain and the US will crash simultaneously.

He expects this to start in 2026 and end in 2028 – 20 years after the previous one.

Harrison can’t pinpoint exactly why 18 is the magic number, but his most plausible explanation suggests it’s determined by interest rates.

The record low interest rates of the past ten years have pushed house prices up. However, with the Fed’s interest rate now hovering between 5.25 and 5.5 percent, it will have a delayed knock-on effect on house prices, Harrison explains.

He estimates that the cycle is as long as it takes a borrower to pay off the interest on a 5 percent loan. At this point the cycle begins again.