Are we headed toward another housing bubble?


| helen.keit@kw.com |



CNN on May 17 posed that question and cited a Trulia report—but got some info right and some wrong. The report actually stated that across the country, in 91 percent of the regions, housing was undervalued. Yet the CNN report mentioned that “some regions are overvalued”—making better headlines than saying in only 9 percent of regions was housing overvalued.

Trulia’s chief economist in fact said “No” to the bubble question when asked recently adding “prices are still low based on fundamentals.”

The chief economist for Core Logic was quoted “there is no reason to believe a bubble is forming since housing prices are still very affordable, even after recent price gains.”

An article by Spencer Jakab in the Wall Street Journal on June 17 addresses this question by explaining that low inventories of homes for sale—a result of fewer homes being built over the past five years and many homeowners unable to sell because of foreclosure or negative equity—have resulted in a constrained supply and therefore quicker sales and bidding wars in some areas. The author feels that pent-up demand for an undersupply of homes for sale is no basis for a bubble at this point.

A June 17 RISMedia report cites the most recent Kiplinger Letter in which their business forecast experts feel the “heat” of today’s market will even out as more sellers decide to sell and interest rates rise in 2014. Homebuilders will also add to the housing stock creating a more normalized market where home prices appreciate roughly 1 percentage point more than the inflation rate each year.  The Kiplinger forecast expects unusual price appreciation of 8.5 percent this year followed by a more normal 4 percent appreciation in 2014.

On the local front according to the May 2013 Real Estate Market Update by Multiple Listing Service of Long Island, the closed median home price for Long Island—including Nassau, Suffolk and Queens Counties—remained equal to what was reported last year—$350,000. However, the favorable buying environment saw pending sales activity for May up 24 percent over last year’s transactions. Realistic pricing and low interest rates have created the prime home buying conditions.

Most important to note: During the bubble years anyone could get a mortgage. Today the banks are thoroughly examining a buyer’s finances, appraisers have strict guidelines and buyers today are staying within their budgets after watching past homebuyers’ horror stories.