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US home prices remain stable, avoid bubble

Posted on Thursday, March 27, 2014 at 8:42:15 AM

Is the U.S. housing market on its way back toward a bubble? This question raises a major concern for potential homebuyers interested in residential financing, and thankfully the answer appears to be no.

According to Trulia, national home prices have remained relatively stable, and while this is only one element of a bubble, it is a good sign that the recovery isn't spinning out of control. The real estate organization estimated that prices across the U.S. are about 5 percent undervalued over the first quarter in 2014. For comparison, at its recent peak in 2006 prices were 39 percent overvalued.

In addition to this national trend, home prices were overvalued in only 19 of the country's 100 largest metropolitan areas. The three markets at the top of the list were all in California: Orange County, Los Angeles and Riverside-San Bernardino. 

Moreover, the S&P/Case-Shiller Home Price Indices reported that price gains slowed down through January 2014.

"The housing recovery may have taken a breather due to the cold weather," said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. "Twelve cities reported declining prices in January vs. December; eight of those were worse than the month before. From the bottom in 2012, prices are up 23 percent and the housing market is showing signs of moving forward with more normal price increases."