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Housing too hot?

Posted by Scott Van Voorhis  May 15, 2013 08:43 AM

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Stop the hand wringing. We are absolutely, positively not headed into a new real estate bubble, Trulia's chief economist Jed Kolko insists.

"Even with a year of strong price gains, home prices still look undervalued by 7% relative to fundamentals," Kolko writes. "This is a rebound, not a bubble."

Kolko's remarks might be more convincing were they they not the intro to Trulia's launch of something called "Bubble Watch."

The online real estate portal and trend watcher says it will be scouring the national and local real estate stats, on the lookout for another housing bubble.

As they say, actions speak louder than words.

According to Trulia, there are no signs of a bubble in 91 of the top 100 metro markets, including the Boston area
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Metro markets where home prices are now overvalued include San Francisco, San Jose, Orange County as well as two Texas metros, Austin and Houston.

Home prices in these markets are inflated anywhere from 2 to 9 percent.

Here in Greater Boston, we are still in negative territory, off 8 percent from our peak during the last real estate bubble, Trulia notes.

That said, asking prices for homes across the Boston area rose 7.6 percent over the past year, so it would not seem to be a big margin to overcome.

But not to worry, Trulia's Kolko argues. With interest rates likely on the rise and more homes bound to be put up for sale in what is now an inventory-starved market, the pace of price increases is bound to slow over the coming year.
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Kolko doesn't discount another housing bubble forming at some point in the future, though.

After all, home buyers are notoriously overoptimistic and our nation's history is filled with all sorts of speculative bubbles.

Here's Kolko:

Will prices keep rising enough to push us back into bubble territory soon? Probably not: in the next year or two we're likely to see more inventory, higher mortgage rates, and declining investor interest - which all would slow down today's price rebound. But is another bubble likely someday, somewhere? Absolutely: consumers seem to be over-optimistic about home prices by nature. The history of American real estate is full of speculation, bubbles, and busts.

Sorry, I don't share Kolko's optimism. Especially when it comes to Greater Boston, where there is little new single-family construction, rising demand, and a three-decade history of big real estate booms followed by busts.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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