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Home prices jumped 14.6% yearly is not something to be happy about.

This home prices increase is definitely not in Malaysia yeah. We are much closer to ‘nothing moves’ versus a double digit price increase.

The typical pay increase for America in 2020 was 3% or less. This is as per PayScale’s 2020 Compensation best Practices Report. Do read the full article in thebalancecareers.com So, how much could one afford when it comes to buying a home after the salary increment? Hopefully the home prices stay almost the same or maybe go up a little… okay? So that even with the small salary increment, one could still afford a home.

This was not the case though. As per latest data, U.S home prices have jumped the most in more than 30 years! I repeat over THIRTY years. Means the last time they have an increase this high was way back in 1988. In 1988, I was just entering secondary school. That’s not all, this double digit price growth has been around for over 10 months. Wow. (with a negative sigh…) Read on.

Article in theedgemarkets.com Nationally, the S&P CoreLogic Case-Shiller index of property values climbed 14.6% from a year earlier. This is the biggest gain in data going back to 1988. This number came after a 13.2% increase in March and this is the 11th straight month that prices gains accelerated. Meanwhile home prices in 20 U.S cities jumped 14.9% and this beat the median estimate in a survey of Bloomberg economists. Please do read the article for more information. Article in theedgemarkets.com

When property prices rise by double digits, this is not something to cheer

When property prices rises way higher than the salary increments, it may also mean that the property price bubble has started to build. It will continue to build until a time when the salary just could not support the property price any longer and we would then have what we call a property bubble bursting and the prices would suddenly fall by double digits too.

Just need to note that some markets could continue to go up if the environment continues to be conducive and someone people could still force themselves to afford a property. They may have decided that a cheaper car is fine and put the extra money into a home. They may have decided that a holiday overseas could just be a domestic travel.

All these would continue to happen until at a point when nothing else could be cut and there’s just no way anyone could pay that asking price. That’s when the music stops. We need to always remember that in 2008, what happened was a mortgage crisis. Hopefully the banks have learnt their lessons and would not continue to lend to ever riskier buyers. Happy understanding that property prices which rises way above fundamental is not good news. Not at all.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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