From the WSJ –
Yet basic economic logic suggests that this apparent evidence of a bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average. Here’s why: While house prices over the last decade have gone through the roof, the annual cost of owning a house has not.
This is an excellent editorial that takes to time to explain some of the basic fundamentals of the “bubble.” I believe that there is certainly room for a decrease in the local market’s rapid rate of appreciation.
From Rismedia –
In a study covering 46 single-family housing markets from 1980 to 2004, Charles Himmelberg, Christopher Mayer (Columbia Business School), and Todd Sinai (Wharton School of the University of Pennsylvania) confront misperceptions about the underlying drivers behind the decade-old real estate boom. The researchers find that recent growth rates of house prices do not reflect a bubble — and, in fact, are largely explained by basic economic fundamentals such as low interest rates, strong income growth among high- income Americans, and unusually low housing prices in the mid-1990s.
I think that the market’s future remains in the middle.