Double-digit price gains in the last year with multiple bid situations that have caused homes to sell for above asking prices have been fueling renewed fears over a housing bubble forming. Could some areas be overheating?
“Prices in some areas are just out of control,” says Scott Tamkin, a real estate professional with Keller Williams Realty in Los Angeles. “As soon as a good property comes on the market at a reasonable price—bam! It’s gone in multiple offers, often times in cash.”
Tight supplies of homes for-sale, low mortgage rates, high buyer demand, and a high number of investors are all helping to drive home prices up in many housing markets. Prices are rising despite major improvements in the economy, particularly with jobs and incomes.
“Home prices need to moderate,” says Lawrence Yun, chief economist at the National Association of REALTORS(R). “It’s bad news in terms of affordability and certainly not sustainable for prices to rise and incomes to lag.”
Certain markets are heating up faster than others. For example, big cities in the Sun Belt region–such as Los Angeles and Phoenix–have seen prices increase nearly 20 percent in the past year. Meanwhile, other big cities like Baltimore, Nashville, and Columbia, Mo., are up only 3 percent to 5 percent, according to NAR data.
The previous housing bubble was marked by double-digit price gains for 45 straight months from August 2002 to April 2006. But housing experts note that the housing market has only seen its first double-digit gain with home prices this year.
“Economists are cautious to dub the buildup as a bubble just yet,” CNNMoney reports. “Though rising speculation, still cheap money, and potentially easier lending would give prices room to run.”
“We’ve never been able to truly identify bubbles until after the fact,” adds Mark Fleming, chief economist at CoreLogic.