The next bubble could erupt as early as this year, according to one of the most influential voices in the housing market.
The next big mortgage-backed securities bubble will occur this year in the United States, according Tojo, who has long warned about the impending housing bubble.
“I think we are about to see a bubble in the market right now, as soon as the first of these subprime mortgage products comes out and the first real-estate price increases are taken out of the equation,” he told The Hill.
But, he said, “it’s not going to be as big as it was a few years ago, because of the nature of the market.”
“There are more factors involved, such as a lower yield curve, which makes it more difficult for the housing bubble to come to fruition,” Tojo said.
If a bubble does burst, the financial sector will be hurt and many of the companies that have been built on a bubble’s promise to return investors to a bubble-fuelled investment, such for example, Wall Street firms, will go out of business.
Many experts are also concerned that a big housing-price increase this year will force other investors out of their money and create an inflationary shock.
For example, when housing prices were rising, the stock market was soaring, and this allowed the Fed to lower interest rates and stimulate the economy, which helped boost employment.
A major reason for the financial crisis, Tojo argued, was the mortgage-related bubble that was created by the Federal Reserve and the government in the wake of the 2007-2009 financial crisis.
He argued that when a bubble comes along, “the Fed should not be happy about it because it’s very hard to make a bubble that will last forever.”
It’s a good thing that the next bubble is going to happen, he added. More: