Market Overview

Bloomberg Reports on Rise of Possible Housing Bubble

Is the U.S. housing market entering the early stages of a possible bubble?

Or is this stagnant industry finally growing? Kathleen M. Howley of Bloomberg published an article earlier Thursday pertaining to these implications in the housing market.

In her article, Howley comments that the Federal Reserves' aim to push down borrowing costs has increased demand in the housing sector. Economists Stan Humphries of Zillow (NYSE: Z), and Mark Vitner of Wells Fargo (NYSE: WFC) agree that low borrowing costs have lead to unstable price rises in some areas.

According to the National Association of Realtors, about 90 percent of 150 metropolitan areas in the United States have showed price increases in the first quarter from a year ago. U.S. home prices have jumped up almost 11 percent this past March compared to a year ago. CoreLogic comments that this gain is the largest upswing since housing prices hit their peak during the real estate boom of 2006.

The housing market has defied analysts' predictions within the past year. Moody's, for example, estimated prices would climb 1.6 percent in 2013. The company quickly revised this estimate and now expects an increase in prices of about 7.5 percent.

Although this data can be seen as concerning, experts at CoreLogic believe it is simply too early to say another housing bubble is emerging. They argue that the biggest gains in prices are attributed to recovering cities such as Las Vegas or Phoenix. As well as thriving job centers such as San Francisco. Other cities in the U.S. such as Chicago and Indianapolis are actually observing a fall in housing prices, while other areas of the country such as Long Island New York, and Omaha Nebraska are seeing moderate price gains of three to five percent.

A recent S&P/Case-Shiller index measured home prices in 20 U.S. cities. The findings from this index discovered that U.S. home prices fell 35 percent from their July 2006 peak to its bottom in March of 2012. Today home prices are still 29 percent lower than this peak.

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