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Posted by on Jul 5, 2013 in Forecasts, Market Conditions | 6 comments | Print Print

More Bubble Warnings

More stories like this should help moderate price increases, though he really doesn’t say much, except mention the b-word - from the SF Examiner:

REDramatic gains in home prices in San Francisco and other large American cities point to a potentially new housing bubble in those areas, according to Robert Shiller, who helped create a closely watched gauge of U.S. housing prices.

Shiller said big price gains in Las Vegas, Los Angeles, San Francisco, Miami and Phoenix, fueled in part by a large influx of outside investor money, are a possible sign of trouble ahead.

“There is a risk of bubbles in these cities,” said Shiller, a co-founder of the S&P/Case-Shiller Home Price Index. “House price increases have been dramatic. It looks like the beginning of the last bubble.”

There is a risk that prices could rise for another year in these areas and then fall back, hurting newer buyers as they try and compete in markets where low inventory and all-cash Wall Street investors were pushing prices upward.

The latest Standard & Poor’s Case-Shiller index report showed that prices of single-family homes in 20 U.S. metropolitan areas jumped 12.1 percent in April, marking the biggest annual gain in seven years. The gains were led by price increases of 24 percent in San Francisco, 22.3 percent in Las Vegas, 21.5 percent in Phoenix, 19 percent in Los Angeles and 13 percent in Miami.

The price gains were the latest sign that the U.S. housing market, a cornerstone of the American economy, may be in a sustainable recovery after the catastrophic property crash that triggered the 2008 financial crisis and subsequent deep recession.

Shiller said it is still too early to predict how healthy the housing recovery is, and he was unsure if prices overall would continue to rise after another year.

But a property crash was unlikely in the near term, he said, because lending rules have tightened and government oversight of the mortgage industry has been strengthened.

Average U.S. mortgage rates increased to their highest levels in two years this week, to 4.46 percent, according to Freddie Mac, the No. 2 home lending company, a potential break on house price increases.

But Shiller said there were clear signs of buying behavior in some major cities that pointed to a housing market that was already overheating, despite the 2008 crash.

6 Comments

  1. Interest rates just went over 5% this morning on 30 year mortgages based on the dramatic spike in 10 year yields. Rates are moving up at a decent pace, so I would imagine this will cause a slow down at some point in the near future.

  2. I see rates in the 4.5-4.9% range. I don’t see anything above 5% yet.

    Sellers are still pricing properties like the interest rates were in 3.x% I think reality will creep in after 90 days on the market. So it will take time for prices to adjust but they do need to go lower from where they are.

    I see the most sellers are listing at say 20% above rational levels so that even if they had to bargain down
    10% they would still come out 10% ahead.

    I think around winter reality will slowly creep in when sellers realize that it’s a buyers market. The only question is will they price it low OR if their ego will prevent them from taking offers much below their expectations

  3. What perfect timing!!!! We are set to look at some houses this afternoon!!!

    That’s ok, my offers will reflect the change in interest rates.

    That should elicit some laughter….. :/

  4. Off topic – I’m remodeling my home office and have been having to use my iPad for surfing the web. When I’m on this site it won’t let me pinch to zoom the text for easier reading. Anyone else have this problem? Any idea how to fix or work around? Too lazy to pull out my reading glasses!!

  5. Is anyone else bothered when these so called experts keep saying what home prices should be? Let the market determine prices!!!

    Most of the experts never saw the last bubble so why believe them now?

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