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Tel Aviv Housing Prices Cool Slightly But Remain Largely Unaffordable for Average Residents, UBS Report Finds

  • Tel Aviv housing market is overvalued but no longer at risk of a bubble bursting, according to UBS report

  • Property prices in Tel Aviv tripled from 2002-2022 but have started cooling due to higher interest rates

  • Home prices still remain largely unaffordable for average residents compared to income

  • Tel Aviv is among the top 5 most unaffordable cities globally based on price-to-income ratio

  • High price-to-rent ratio in Tel Aviv indicates prices could still be vulnerable to corrections if rates stay high

timesofisrael.com
Relevant topic timeline:
The U.S. housing market is facing dire consequences due to high mortgage rates, a housing supply shortage, and a lack of confidence in the Federal Reserve's actions, according to market expert James Iuorio.
The current housing market has defied expectations of a downturn in real estate prices caused by surging mortgage rates, with prices and demand remaining strong due to increasing household formation among baby boomers, according to a Wall Street economist.
Utah's housing market experienced volatility and a contraction due to the COVID-19 pandemic, leading to a decline in home prices and affordability issues, but experts do not predict a crash due to the state's strong economy and growth, although a housing shortage is expected to worsen by 2024. Interest rates have caused fluctuations in homebuilding activity, and despite a dip in housing prices, affordability remains a challenge for many. Predictions for the housing market include a modest price correction, an increase in homebuilding activity and real estate sales in 2024, and a continuing housing shortage. Interest rates will play a crucial role in determining the future of the market.
The risk of a real estate bubble has decreased globally due to price corrections in 25 cities, with only Zurich and Tokyo remaining in the "bubble risk" category, according to UBS's Global Real Estate Bubble Index, while Frankfurt, Munich, and Amsterdam have moved to the lower-risk "overvalued" category.
The global risk of housing bubbles has significantly decreased in 2023, with only two out of 25 cities surveyed being at risk, down from nine in previous reports, due to rising interest rates and the end of cheap financing in the real estate sector.
Home prices in Tokyo and Zurich are considered to be in bubble territory, and two US cities, Miami and Los Angeles, are overvalued, due to the impact of rising interest rates on housing markets worldwide. Other cities at risk of declines include Tel Aviv, Munich, Hong Kong, Geneva, and Frankfurt, where prices relative to rent values have become too extended.
A climate-risk intelligence firm has warned that some of the most overvalued housing markets in the US, particularly in California and Florida, are at high risk of climate-related damage from extreme weather events, leading to potential losses of $1.3 trillion to $2.2 trillion in a market rationalization.
The housing market is currently considered overvalued, with homes selling above their long-term prices in most major markets, but experts disagree on whether this indicates a housing bubble or if high prices are justified due to the housing shortage and strong demand. The fear of buying at the peak of the market and concerns about rising mortgage rates are factors influencing buyer decisions, but if rates come down, it could lead to an increase in prices. While there is a possibility of a price correction, most experts do not expect another housing crash like the one experienced during the Great Recession.
The U.S. housing market is extremely unaffordable, with mortgage rates reaching a multi-decade high at 7.49% and incomes needing to increase by 55% for affordability; however, experts suggest that home prices and mortgage rates are unlikely to decrease soon due to low inventory and high demand.
The housing market is currently in a bad place for buyers, but sellers are also facing challenges, with high mortgage rates and dropping prices. Although the market may have hit rock bottom, there may be further pressure on sellers in the future.
The housing market is currently experiencing high mortgage rates and rising home prices, making affordability worse than in 2008, according to Goldman Sachs analysis. Despite stronger consumer fundamentals, housing affordability has deteriorated beyond 2006 levels, and without an increase in home supply, unemployment, or a drop in mortgage rates, home prices are expected to continue climbing.