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Today home prices are rising nearly as fast as they did.
During that heat bubble years of 2005 to 2006.
So is this real estate rebound getting ahead of itself.
-- -- chief economist -- called us here to give some context to what's really going on in the recovering housing market Jack thank you so much for being here.
Thanks for having me.
So historically low interest rates home sales up in the double digits home prices up eight point 3% year over year.
These are are really good but it almost seems too good dad.
The housing market is seriously recovering now.
The housing market is more than halfway back to normal and prices are now rising as fast as they were during the bubble years last decade.
But this is a rebound not the start of a new Bobble.
That's because home prices today are still undervalued.
By 7% relative to fundamentals during the bubble last decade.
Prices rose as high as 39%.
Overvalued vs fundamentals so prices today are much lower than they were at the height of the bubble.
Even -- prices are rising.
As fast as they were -- Home prices up eight point three -- say here every year I mean that growth seems very fast is it just because things are so undervalued.
That growth is fast a lot of this is a rebound because prices have been so undervalued after the bubble burst.
But I expect that we're gonna see these price -- start to slow down for several reasons first of all we should see more inventory coming onto the market in the next year Q.
As people decide to take advantage of recent price gains and sell their homes.
We also should -- more construction which would add inventory to the market.
Higher mortgage rates could also slowdown increasing price gains because when mortgage rates rise people can't afford quite as much house.
And the other thing is as prices rise we're gonna see a slowdown in the investor activity.
Investors are most active when prices are most undervalued now the prices are rising some of that investor activity will decline.
So you just released a new study about housing bubbles can you tell me what -- found.
Out of the hundred largest markets in the US prices are overvalued at only eight of those hundred.
-- -- markets include Orange County California.
Austin, Texas and a few other markets in California and Texas.
But in the rest of the country prices look undervalued -- that the fundamentals most of all in Las Vegas and Detroit.
Even though Las Vegas in Detroit where the markets that have seen some big price increases in the past year.
So a lot of houses are still undervalued it just really I think it depends on the local -- get.
It's very local even the last decade's housing bubble was national.
It's more common that we see local housing bubbles.
We saw prices rise sharply in the eighties in Texas in the nineties in upstate New York.
And we saw bubble first in Southern California in the ninety's as well.
So typically we have to be on the -- at the local level for the next housing bubble.
So you would say even though nationally things are going pretty well overall.
You know you have to look to your local market to see whether or not I mean could things really get inflated this quickly.
Not yet even the most overvalued market locally right now.
Orange County California is still only 9% overvalued.
During the bubble local markets got as high as seventy or 80% overvalued relative to fundamentals.
So even the most overvalued local market today is still a long way from bubble territory.
Would you tell potential sellers sellers obviously been holding back.
In recent years because they don't want to lose money so is this the -- out.
We're going to start to see some sellers decide but their homes on the market.
Prices have risen in some parts of the country for more than a year.
And -- prices rise lots of underwater homeowners are getting back above water and will decide this is the time to sell.
Others there -- gonna wait to hold off.
In the hopes that prices keep rising and of course many people who want to sell might also be looking for another home to buy in inventories very tight.
For people who are looking to -- So is still a good market for buyers are they still getting a deal here.
In most of the country prices are undervalued.
Quite inexpensive to -- relative to renting.
Both because prices are undervalued but also because mortgage rates are incredibly -- For people who can get a mortgage and people who -- -- -- house that they want given the tight inventory.
It's quite inexpensive to -- but you've got to be able qualify for today's low mortgage rates and banks are willing to lend unless you've got a top credit score.
And that that leads into my next question what about lending I mean though rates are at historic lows.
The banks have been very stringent even for a lot of people who have decent credit.
Mortgage lending remains very tight.
Even though mortgage lending is getting a little bit looser for people the best credit it isn't really change for people.
With worst credit.
That makes it hard for a lot of people would want to be comforts from home buyers to buy home.
I think is mortgage rates rise we're going to see banks -- some other mortgage activity away for refinancing.
To new home purchases.
And the -- mortar duels -- come into effect next year might make more might make some banks more comfortable.
Writing loans that meet these new mortgage rules so we may seem -- mortgage credit.
Available within the next year but we'll have to wait and see what effect of those new rules are.
Great points -- thank you so much for coming -- we really appreciate it.
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