With home prices once again on the rise, homeowners are happy but some analysts are worried that the housing market could be headed for another bubble. Trulia analysts, however, reassured “bubble-phobes” this week that they do not need to worry about a housing bubble in the near future. According to the data firm’s “Bubble Watch” report, which compares price indices to per-capita income and rent data from government releases, home prices are still seven percent undervalued on a national level. For comparison, at the height of the housing boom immediately before the bust, home prices were 39 percent overvalued.
Trulia’s chief economist, Jed Kolko, explained that even though prices are “rising sharply” right now, they still have a way to go before homes begin to be overvalued once more. However, he added a word of caution. Eight of the country’s 100 largest metro areas are “showing evidence of overvalued prices,” he said. “We’re far from bubble territory today, [but] there will be another home-price bubble someday, somewhere,” said Kolko. “The history of American real estate is full of speculation, bubbles and busts,” he said, adding that “we need to stay on guard.”
by Carole VanSickle