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Rising home prices are leading to fears of a new housing bubble


Here's something a lot of people are wondering - are we in another housing bubble? During the pandemic, home prices shot up more than 30% nationally, and now some economists think prices in certain cities could fall. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Chelsea Fitzgerald Dole and her husband Kevin live in Nashville, Tenn. And they really like it there.

CHELSEA FITZGERALD DOLE: I fell in love with the city. I met so many incredible people.

KEVIN: The food scene is awesome. The music scene is unparalleled. It's a really fun city to be in.

ARNOLD: But what's not so fun is that the couple bought a very small, two-bedroom condo a few years ago. And during the pandemic, they've been crammed in there, working at home remotely. Kevin's a musician on the side, and his drum set's in the middle of the living space.

DOLE: This is an electric drum set, but it is a full-size professional quality, straight-up drum set.

ARNOLD: Oh, yeah. Look at that. That is a no-joke, serious, big drum set.

DOLE: Yes (laughter).


DOLE: I have recently invested in a great pair of noise-cancelling headphones. That has been super helpful.

ARNOLD: OK, so you get the idea. They need more space. But the couple does not make a ton of money, and they have a lot of student loan debt. So they're planning to move away from the city that they love because they just can't afford a bigger house here.

KEVIN: Everything around us has just exploded.

ARNOLD: Nashville is one of a bunch of formerly affordable cities that, during the pandemic, have seen remote workers and retirees move there from higher-cost places like New York and California. Companies such as TikTok and Oracle are opening up offices there, too. That's creating new jobs, and all of that has been pushing up prices. Mark Zandi is chief economist of Moody's Analytics.

MARK ZANDI: Nashville house prices are up. Through March, year over year, it's now over 30%. So Nashville is, like, raging on fire - you know, very, very strong house price growth.

ARNOLD: It's not just Nashville, of course. Prices all over the country have been rising way faster than normal. And we saw that happen 15 years ago before the bubble burst, sparking the worst crash and recession in generations. So what's going to happen this time around?

ZANDI: I believe that it is a bubble, I just don't know when it's going to burst.

DOLE: This can't last forever. Whatever it is that's happening, you know, all of the locals being pushed out of Nashville and people not being able to afford homes...

ARNOLD: You mean prices can't keep rising like they have been?

KEVIN: Yeah.

DOLE: Yeah.

ARNOLD: Just about all economists agree on that last point. Home prices have to level off, at least grow more slowly. Too many people just can't afford to buy now, especially with rising interest rates. And some economists, like Mark Zandi, actually think that prices could fall, at least in the most juiced-up markets like Nashville, Boise, Phoenix, Miami. There's a lot of them.

ZANDI: Yeah, I expect prices to come down. If you told me two years from now prices are 5%, 10%, 15% below where they are today, where they're peaking, I say that sounds about right to me.

ARNOLD: He says, though, to keep in mind prices are up 30% just in the past year in some of these places, so that wouldn't be such a huge pullback.

ZANDI: I don't expect a collapse in house prices like we did back in the crash for two fundamental reasons. One is supply. There's a shortage of homes that are available.

ARNOLD: And he says new federal rules have put an end to the reckless mortgage lending that helped cause the last crash.

For their part, Chelsea Fitzgerald Dole and her husband Kevin are planning to leave Nashville. They're going to work remotely and move 4 hours away to a part of Kentucky near Cincinnati. Kevin has family there, and they can get a three-bedroom home, they say, for about half the price, about $250,000.

DOLE: It's definitely more challenging for me, I think, because I don't have any friends where we're moving to. And moving to northern Kentucky - that's going to be a new, different experience.

ARNOLD: On the upside, though, they are looking for a house with a well-insulated basement so Kevin's drum set will not be in the living room.

Chris Arnold, NPR News.

(SOUNDBITE OF DRUMS) Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.