Home prices rising, but no ‘bubble trouble’ | Mt Kisco Real Estate

Home prices are rising sharply, but economists speaking at the National Association of Real Estate Editors conference here are not worried about overinflation.

“We are not in ‘bubble trouble,'” said Jed Kolko, chief economist at the online real estate information company Trulia. “Prices are undervalued 7 percent relative to long-term income and rent norms. We see no signs of overbuilding, and few signs of people overborrowing.”

Noting that prices were 40 to 70 percent overvalued during the past decade’s boom, Kolko said, “Prices would have to keep rising at the current rate (10 percent nationally) for several years to reach another bubble.”

Still, “home price growth is widening very fast,” said Lawrence Yun, chief economist of the National Association of Realtors. “The good news is it is lifting people out of being underwater and offsetting the effects” of the government’s budgetary sequestration of funds.

“There is no risk of recession” in the next couple of years, he said.

Yun is concerned, however, that home-price growth is outpacing income growth. When mortgage interest rates inevitably rise, “that will negatively impact affordability.”

Price growth is creating “the haves and the have-nots. Owners are smiling.”

Those who would like to be owners are not.

Putting upward pressure on prices, beside consumer confidence and buyer demand, is that home builders are still producing fewer than the historical norm of about 1 million units per year. New home sales, Yun said, are at 28 percent of the 2006 peak, although he acknowledged that was a period of overbuilding.


Home prices rising, but no ‘bubble trouble’ | HeraldTribune.com.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.