Home prices are rising rapidly, but economists are deflating concerns that another “housing bubble” is brewing.
A recent report from CoreLogic shows that twice as many metro markets are considered “overvalued” — prices are inflated relative to incomes — in the second quarter of this year compared to the first three months of the year. But economists say it’s not a housing bubble because bubbles eventually burst and home prices this time around aren’t likely to fall.
“Just because you’re overvalued doesn’t mean that you’re in a bubble or there is an impending crash,” says Sam Khater, CoreLogic’s deputy advanced notice chief economist. “Some markets are overvalued because of strong fundamentals.”
The National Association of REALTORS® reported that the national median sales price is now above its 2006 peak. The median existing-home price for all housing types reached $236,400 in June — 6.5 percent above year ago levels and surpassing the peak median sales price set in July 2006 at $230,400, according to NAR.
Tight supply should prevent a dramatic move down in home prices. Instead, price gains are likely to ease, as supply grows throughout the slower fall and winter months. Prices are also supported by a far larger than normal share of all-cash buyers, which suggests still strong investor demand.
About 10 years ago, a housing bubble was being fueled by free and easy mortgage credit — not the case today, CNBC reports. Today, strong demand and weak supply is driving the rise in prices. “Agents continue to highlight buyers’ growing frustration with rising prices, but see current levels largely supported by tight inventory conditions,” according to a monthly survey of real estate professionals by Credit Suisse.
Source: “Frothy, Yes, But Don’t Call it a Housing Bubble,” CNBC (Sept. 15, 2015)
Read more about the housing market:
Economists: Fort Collins not in housing bubble | Coloradoan.com
Are We Headed Into Another Real Estate Bubble? | MoneyTalksNews.com