Concerns over the bursting of the American real estate bubble have eased.

In 2020,fhch exchange following the outbreak of the global pandemic, the United States' real estate market experienced a frenzied rise, influenced by the Treasury and the Federal Reserve providing substantial amounts of cheap capital and lowering bank interest rates, especially mortgage rates. The cheap capital and lower mortgage rates led to a situation where, for the first time since the subprime mortgage crisis of 2008, the U.S. real estate market saw a sustained increase in both volume and price.

After nearly three years of significant increases, some institutions and market participants have begun to worry that the U.S. real estate market may face a bubble burst similar to the subprime mortgage crisis, especially as the S&P CoreLogic Case-Shiller home price index saw a decline after the Federal Reserve began raising interest rates.

However, compared to the classic bubble burst, the current U.S. real estate market has undergone "disruptive" changes. Factors like the ultra-low mortgage rates post-pandemic, remote work, and the need for home upgrades have driven a continuous rise in the U.S. real estate market over the last three years.

While the Federal Reserve's interest rate hikes to curb inflation have significantly raised mortgage rates from the early days of the pandemic, the potential for further increases in mortgage rates is limited as the Federal Reserve's rate hiking cycle nears its end. This is expected to once again boost the demand for housing, which had been suppressed by rising mortgage rates.

Zillow's Senior Economist Jeff Tucker stated that the consecutive interest rate hikes begun by the Federal Reserve in 2022 have cooled down the hot U.S. real estate market to some extent, with home prices actually falling in some areas of the country. However, the latest data suggests that the price drops in 2022 are more of an adjustment rather than a market crash.

Aside from the potential boost in housing demand as the Federal Reserve's interest rate hikes come to an end, a low supply and inventory of houses is also a key reason supporting the continuous rise of the U.S. real estate market. Recent data shows that, although construction of new houses in the U.S. has started to increase, it is still at a relatively low level compared to recent years. Limited housing supply and the limited potential for further increases in mortgage rates not only restrict the extent of any decline in the real estate market but may also act as a driving force for maintaining high housing prices or even pushing them higher.

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