We all know home prices are back up around 2006 levels. This has led people to say we’re in another housing bubble.
But while housing prices have definitely taken off over the past year or so, it does not necessarily mean it’s 2006 all over again.
There is a one very big difference this time around—subprime mortgage growth is nowhere near 2006 levels:
It’s a “prime” bubble, if anything.
The reason the housing bubble got so bad in the 2000s was because the subprime loans began a chain of defaults that eventually took down the whole system. There were so many subprime loans back then, but today we don’t see that.
The risk of this turning into a massive crash would appear to be lower today, but that doesn’t mean things are all fine and dandy.
Because prime buyers are driving the price bubble, it could mean housing prices are going to be permanently higher for years to come. Affordable housing in many parts of America appears to be a thing of the past.