Is US housing 20% overvalued?

Dean Foust

Jan Hatzius, an economist at Goldman Sachs & Co., just wrote an interesting report that should make anyone who bought at the top in a bubble market feel a little queasy. By his calculations, Hatzius believes that given the sharp rise in housing prices, coupled with the rise in mortgage rates, that home prices are about 20% overvalued at present. Hatzius isn’t predicting an outright plunge in prices. He believes the bubble could be unwound either through a stretch of time where prices stay stagnant until incomes catch up (which is what he calls, in econo-speak, his “baseline assumption”), or a significant drop in interest rates. Or through an outright decline in home prices.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.