Federal Reserve warns of brewing US housing bubble

But experts say bubble won’t burst like it did in 2008 recession, especially in growing cities like Jacksonville

JACKSONVILLE, Fla. – Economists with the Federal Reserve issued an unsettling warning to millions of potential homebuyers, cautioning that the real estate market is showing signs of a brewing U.S. housing bubble.

But experts who News4JAX spoke with say the bubble won’t burst like it did in the 2008 recession, especially in growing cities like Jacksonville -- which instead might continue to see a home and rent affordability crisis.

As Northeast Florida home prices continue to soar, some buyers are so desperate that they are willing to forgo a house inspection.

It’s those rising prices that economists with the Federal Reserve Bank of Dallas say are out of step with the rest of the real estate market and could lead to the bubble bursting.

But according to real estate experts, unlike a decade and a half ago, Florida has limited inventory versus an oversupply of homes -- which real estate economist Ken Johnson, with Florida Atlantic University, says will lead to a drawn-out affordability crisis.

“I think what we will talk about this bubble, if you will, and I use that term to emphasize that there’s going to be some pain involved in this,” Johnson said. “And rather than seeing prices crash, I think the Fed is perhaps a little bit off on that, at least for Jacksonville.”

Johnson says the prices of homes may eventually crash in other metropolitan areas like Memphis, Tennessee, and Detroit, Michigan -- cities where he says the population simply isn’t growing. But that’s certainly not the case in Northeast Florida as more and more people are coming to the Sunshine State.

“Too many times people interpret that word ‘bubble bust,’ just what happened back in ‘08,” said Northeast Florida Association of Realtors President Mark Rosener. “And I really don’t see any signs that, that is happening.”

Rosener expects a more normal selling season in the upcoming summer and fall months, pointing to the equity homeowners have gained during this red hot sellers’ market.

“We have more equity in our homes today as Americans than ever before -- historic highs. What happened the last time was more of a banking industry failure, and people were extending themselves beyond their means. And the supply was much higher than it is today. And there wasn’t any equity in their homes. That makes a difference,” Rosener said.

Homes in North Florida are selling for 37% more than they should be, according to real estate experts. They say long-term effects we’ll feel in the Jacksonville area will be continued high home prices and perhaps even higher rent.


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Tarik anchors the 4, 5:30 and 6:30 p.m. weekday newscasts and reports with the I-TEAM.

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