Experts say a real estate bubble could be forming

CEDAR RAPIDS, Iowa (KCRG) — A housing expert says the market is shaping up like 2008 and a housing bubble could form.

“It was amazing when I finally signed the papers,” said Sambit Misra, first-time owner at Iowa City. “Your brain automatically goes straight into ‘how can I make this mine.'”

It took him and his wife three months to find the perfect place.

“It was frustrating trying to find a place we could afford because of rising housing prices,” Misra said.

John Huiskamp, ​​senior vice president of the Fairfax State Savings Bank, said a rise in house prices, an increase in the number of people buying homes and an increase in interest rates were similar to the accumulation of the housing market crash of the early 2000s.

“There was a term, at the time called, NINJA loans: no income, no job and no assets,” Huiskamp said. “Unemployed people could get a loan.”

Huiskamp said those loans helped formulate the stock market crash. New laws have been put in place to prevent this from happening again.

“You have to prove that you can repay your loan,” Huiskamp said.

The reason for this market shift was COVID-19 and the accompanying supply chain issues.

“COVID-19 has changed so many things in our lives, and it has changed that too,” said Emilie Walsh, broker at Keller Williams.

Walsh said the market now has to sort itself out, which could take some time.

“We’ve increased prices 25 to 30 percent from three years ago,” Walsh said. “It’s going to correct itself because it’s way too fast.”

As the market corrects, Walsh said people like Misra should be patient when looking for the right house to call home.

“I texted Emilie, and within the hour she texted me saying the house was full,” Walsh said. “I was like how it happened.”

Walsh also said people who get pre-approved for a loan should reevaluate how much they can pay month-to-month due to inflation.

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