It’s time to call the bubble over, but what will the market look like five years from now?
That question was posed to the economists and policymakers of the U.S. Securities and Exchange Commission on Tuesday during a conference call to discuss what’s next for the housing market.
Here’s what they had to say.
“Housing starts are going to come back in about three years, so it’s really not a bubble, and we are probably not there yet,” said Paul Ashworth, chief market strategist at BMO Capital Markets.
But there’s some optimism in the market.
The S&P 500 SPX, +0.03% has rallied more than 50% in the last five months, and the Dow Jones Industrial Average DJIA, +1.29% has surged nearly 600%.
“The fundamentals of the economy, we have the housing bubble, we are in a period of extreme uncertainty about how long the housing recovery is going to be, and there’s a lot of talk of a housing recovery slowdown,” Ashworth said.
“The question is, when will it end?
Will the recovery be sustained and then be followed by an even stronger recovery?”BMO Capital Economics economist Andrew Laitin said the market has gotten off to a strong start.
It’s “really not a question of if but when,” he said.
The Federal Reserve will probably stay in place until the next presidential election, and many economists say that could happen before the end of the year.
But if markets keep trending upwards, the Fed may begin to loosen monetary policy, allowing more households to borrow and businesses to expand.
“I think we’re going to see the housing rebound take off,” Laiton said.
And while he said he doesn’t expect the economy to peak in the next few years, he said the Fed’s monetary policy will “probably accelerate the housing revival.”
Still, he cautioned that it will take a while for the economy and housing markets to get back to normal.