With the effects of the Great Recession still lingering throughout the American economy and the leading roll the crashing housing market played in the collapse, speculation about another bubble remains constant but largely unfounded. Historically low interest rates and consistent price gains notwithstanding, most overvalued housing markets are confined to just a few states.
Additionally, this past third quarter revealed that nationwide home prices were actually undervalued by 3 percent when compared to long-term fundamentals, according to Trulia's Bubble Watch. Comparatively, prices were overvalued by 34 percent in 2006. The second quarter showed a trend of 5 percent undervaluation with most sectors residing in New England and the Midwest.
Conversely, there are individual markets that merit close monitoring. Houston stands as one of the most overvalued housing markets according to Trulia, as reported by the Houston Business Journal. Moreover, Houston and Austin stand as the only two cities in the country that are more overvalued today than they were in 2006, with Austin ranking as the most overvalued area in the nation. The Trulia report went on to explain that while Texas markets were spared the worst of the housing bubble, they've recent experienced double-digit home-price increases.
Nevertheless, identifying a bubble event remains complicated with many experts saying that a sector can't definitely be declared a bubble until it bursts.
Jed Kolko, Trulia's chief economist, expounded upon this in saying that "Sharply rising prices aren't necessarily a sign of a bubble. By definition, a bubble develops when prices look high relative to fundamentals. Bubble watching is as much an art as a science because there's no definitive measure of fundamental value."
Still, utilizing price-to-income ratios, price-to-rent ratios and prices relative to their long-term trends have effectively shown that the market is presently at little risk of repeating crisis of a few years ago.
Using e2Value's patented web-based estimator is also a dependable way to reach an actionable commercial property valuation or home valuation.