Overvalued Isn't The Same As A Housing Bubble

Properties coming to the market are being priced at record highs. Experts watching the economy state that these prices are not indicators of another market crash on the horizon. The term “housing bubble” is a scary one, but that is not what is happening today.

CoreLogic reports that two times as many urban markets are overvalued. This means that prices are inflated compared to the incomes of people looking to buy in these areas. This is a comparison between the second and first quarter numbers of this year. The values on these homes are not expected to fall anytime soon, which is the opposite of what a bubble is. Bubbles eventually burst. These home prices are high because there is limited inventory in desirable areas. Not because of sketchy selling practices or false statements by lenders.

Sam Khater is the deputy chief economist at CoreLogic. Khater states that "Just because you're overvalued doesn't mean that you're in a bubble or there is an impending crash … Some markets are overvalued because of strong fundamentals."

According to the National Association of Realtors® (NAR) the national median sales price is now above its 2006 peak all across the nation. The median has reached $236,400 in June. This is true for all different types of housing that is existing, not new structures. It is a 6.5 increase compared to a year ago. These levels exceeded expectation for the projected July 2016 median value, at $230,400.

The report by CoreLogic also finds that 14 of 100 big markets have had substantial increases in home values, far above the long-term fundamental values previously established. Six of the markets cited in this instance are in Texas. Since the demand for housing is high and supplies are low, prices have been rising.

A decade ago, the housing bubble was created by fast and free ‘no money down’ offers for mortgages. Today CNBC reported that this is no longer an acceptable bank practice. High demand for homes and low supply in popular areas is what is pushing these price increases.

Credit Suisse is a group of real estate professionals. They conduct a monthly survey. They observed that "Agents continue to highlight buyers' growing frustration with rising prices, but they see current levels largely supported by tight inventory conditions."