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Ideatrotter

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Could the Housing Bubble Reinflate?.

Karl Smith, Assistant Professor of Public Economics at UNC, has voiced the possibility of a resurgence of the housing bubble. Fannie and Freddie are considering cutting bulked foreclosure sales, deficit cutting seems to be the Fed’s next move and lack of rental provisions is a constant worry as it may force families to borrow, forcing banks to expand credit. 

However, the flipside of this dilemma, is that expanding credit will lead to soaking up the excess housing inventory, which will lead to a surge in prices. This will ramp up new housing development, causing a boost in household demand, immigration and property appreciation. So while there is the potential to repeat history, it can be remedied with regulated lending requirements, collateralized default plans, scrutinized ratings requirements and regulated interest rates. We can control the boom before it turns into a bubble.