Skyrocketing home prices in a few markets have some analysts concerned that prices are on the rise too fast and could ultimately hamper the housing recovery.
“In many markets, fundamentals are improving as unemployment rates continue declining, while low prices and low interest rates have affordability high,” according to analysts for Fitch Ratings, a credit rating agency. “However, especially in cities that never fully unwound the mid-2000s bubble, rapidly increasing price levels are a potential cause for concern.”
Many of the areas of concern are in California, where home prices have posted gains of 13 percent in the past year alone, according to analysts.
Limited housing inventories of for-sale homes mixed with rising buyer demand are mostly behind the rising home prices.
“We believe this level of housing demand is likely to abate once the pent-up demand is satisfied,” Fitch analysts said. “The supply is also artificially low, as recent regulations have limited the pace of foreclosure sales and the large percentage of underwater borrowers continues to hope for future price increases to be able to sell their homes at a profit.”
Source: “A new bubble forecasted in key real estate markets,” HousingWire