We just got the holes plugged in our housing ship and trying to sail back out in the ocean. But it seems like wind(price) is blowing high, pushing ship to move fast which might not be all good. I still remember those days just a year ago when many were asking whether we will ever see the end of the tunnel and as soon we are out, we are already heading to next big thing already. Is good or bad? Here is the report from cnbc release few weeks ago.

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.

“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. To be sure, not all areas are overheated nor have some even recovered since the downturn. But in most big cities, demand is hot, deals are quick, and many properties are getting bid up before selling for cash.

And even though home values are still a far cry from their peak in 2006, economists caution that prices in some areas have risen too far, too fast. “It’s clearly not sustainable,” said Stan Humphries, chief economist at Zillow. Wells Fargo Senior Economist Mark Vitner seconded that: “If investors don’t back off soon, it could lead to a bit of a price bubble.”

A big difference between the current buildup and the previous bubble is that we are only in the early innings of double-digit price gains. March home prices rose greater than 10 percent, according to the S&P/Case-Shiller 20-City Composite. That was the first double-digit gain the index saw since April 2006.

In stark contrast, home prices soared double digits for 45 straight months from August 2002 to April 2006, Case-Shiller data show. Price appreciation peaked at 17.1 percent in the summer of 2004.

Trulia identifies eight markets as overvalued relative to historical prices, incomes, and rents. They include Orange County, Austin, San Antonio, Los Angeles, San Jose, San Francisco, Houston, and Portland.

Click to read the full article.

As you can see Houston is one of the markets which is overvalued and rising high compared to other markets. It has mixed feeling. Especially,People are afraid of prices just going to go up and up and up. With recent interest rate increase, it has already slowed down the activity bit compared to few months ago. With more price and rate increase, it might push more consumers away putting a break which should allow for some correction before we start the new year. That’s my 2 cents.

About Vijaianand Thirnageswaram

I am a Proud Realtor of Texas, trying to guide and help clients to find their dream home and educate them to buy them for right price. I am also a Candidate for CFP who has more financial knowledge which allows me share and educate clients in any financial decision making process.

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