Question

Do you think the United States is more or less likely to face another housing crisis similar to the one experienced in 2008?

Answer 1

Yes, the given statement is true because United State will face another housing crisis because there is a bubble in the Asset prices and it is clearly visible in the United States and it is inflating very high because of the capital market euphoria of a bull market so there is very liberating interest rate regime which is focused on easing off interest rate at very lower rates and which are the part of quantitative easing policy so the real estate prices have been very high and it is bound to collapse due to lack of demand when the credit cycle Tightens.

The credit cycle will tighten, once there is lack of demand and the housing prices will fall so that all the subsequent assets which have been created on the basis of inflation in housing prices will lose its value and those banking loans against inflated price of houses will also lose the the value, so it can lead to widespread contagion because of inflation in real estate and it is expected that the crisis will unfold in the long run because of euphoria in real estate prices .

Real estate prices has collapsed due to lack of demand due to credit tightening of coronavirus and it is visible in the housing prices in los Angeles and other cities across United States, so it can unfold into a bigger crisis if it is not managed properly.