Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

House prices have been rising rapidly over the last two years, growing faster during the pandemic

than in the lead-up to the 2007 financial crisis. This has led a lot of people to ask if we're in the middle up to the 2007 financial crisis.

This has led a lot of people to ask if we're in the middle of another housing bubble.

This is an important question, as housing is often the most valuable asset owned by most people.

It's also a complicated question and the answer has many components. So let's look at the recent rise

in home prices along with the changes that have occurred during the pandemic so that we can

better compare the current real estate market to the market in the lead up to the credit crunch.

We'll look at regional and international differences to try and understand

exactly what's going on. Okay, so what is going on in the real estate market right now? Well,

US house prices rose over 19% over the last year after being up around 8% in 2020. This compares to average annual returns of around 14%

per year between 2003 and 2005, the bubble period. Now, we had three years of double-digit

growth in the lead-up to the credit crunch, so U.S. house prices are rising faster right now than

during the bubble years, but they haven't been doing so for as long. Anyone who's been in the

market for a new home over the last year or so is aware of how competitive things have gotten. Zillow reports

that more than half of the houses sold in the US last year

transacted above the seller's initial asking price. The United States is not an outlier with these

price rises either. In fact, the US didn't even make the top 10 in 2020 when house prices rose by more than 5% in 23 countries

around the world, despite the global pandemic.

Now just because prices have been rising doesn't mean that it's a bubble.

To add some context before the pandemic, 2020 was expected to be a big home buying year anyhow.

This is because of the sheer number of millennials that were reaching home buying age.

...