In a time of sharply rising U.S. home prices, should one worry about a new housing bubble? Apparently not. Despite the price hikes — which are currently increasing at the same rate as during the 2003, 2004 and 2005 bubble years — there is no bubble today, the Wall Street Journal reported, citing Trulia data.
The difference is that home prices are now undervalued when compared to personal incomes and rents. In the bubble years, they were overvalued by 39 percent nationally. Today, on a national basis, prices are undervalued by 7 percent roughly.
“Today’s price gains are actually still a rebound, not a bubble,” said Trulia Chief Economist Jed Kolko.
Las Vegas and Detroit are the markets where prices are most undervalued, with a respective 24 percent and 23 percent below Trulia’s estimate for fair value, the Journal said. [WSJ] —Zachary Kussin