As the housing prices continue skyrocketing -- with recent numbers showing it at a 5-year high -- analysts are beginning to wonder: “Is this another real estate bubble?”
According to the latest number in the Case-Shiller, the Standard & Poor's Home Price Index, home prices in January hit the highest they have ever been since the last bubble burst.
Concerns have grown among analysts as to whether this accelerated recovery in the housing market is driven by sustainable factors and it could be another bubble in the making. House prices have increased for 12 straight months, growing 8 percent since last year and 1 percent alone from December to January.
"As noted previously, the run-up in prices in the bottom tier of these markets is not necessarily cause for concern, since prices had fallen so precipitously during the downturn," writes economist Dean Baker in assessing the latest Case-Shiller figures. "However the rate of increase is alarming. Certainly this cannot be sustained for any substantial period of time. At the moment it is being driven in most of these markets by investor purchases. With rents in no way keeping pace, the fundamentals in these markets will not support much higher prices. This could end badly for homeowners who may again be buying into a bubble."
A conjugation of several factors seems to be driving home prices upward. Low inventory, but high demand, for one. Sellers are waiting until prices have reached a threshold where they feel comfortable selling. Meanwhile, home buyers are hoping to take advantage of low interest rates and what in some markets are still-depressed home prices. Much of the rebound in prices is attributable to institutional investors piling into housing -- such players make up a much larger share of buyers than they did years ago, or should in a normal market.