Yahoo Finance Home Prices Hit an All-Time High: Is This Another Bubble?
U.S. home prices set an all-time high in June, eclipsing the previous peak set nearly a decade ago. While the record may make homeowners feel house rich, the rate of appreciation in many markets may point to a bubble that's close to bursting.
The median home price rose 6 percent month over month and 9 percent year over year in June to $231,000, according to ATTOM Data Solutions, formerly known as RealtyTrac. That's the highest level since July 2005, when the median price reached $228,000 before the last housing downturn and subsequent recession. Thirty-nine of the 130 metropolitan markets that ATTOM follows also hit fresh highs in the month.
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Is this cause for celebration or concern?
"I would land on the side of concern," says Daren Blomquist, senior vice president at ATTOM. "While homeowners slogging through the downturn can finally say they regained the value that was lost in the downturn, in certain markets, prices have risen between 30 and 50 percent in four years. That's not healthy. That's not sustainable."
Blomquist noted that ATTOM also tracks the affordability of housing in these markets, and many of those areas experiencing eye-popping appreciation are the same ones where many homebuyers are priced out, such as Brooklyn, San Francisco, Denver, Portland and Austin.
Nationally, the ATTOM report noted a decline in the share of all-cash buyers to the lowest level since the fourth quarter of 2007 — another troubling sign. "Cash buyers are becoming less of a driving force in the market, they are backing out," Blomquist says. "It could be a sign that they too have been priced out and the market is overheated."
The share of homebuyers using mortgages backed by the Federal Housing Administration, a good proxy for first-time buyers, was down year over year. The number of FHA buyers jumped last year after FHA insurance premiums were lowered, but that boost was short-lived. "They're not becoming an increasing part of the market," Blomquist says.
He adds that low interest rates have kept many of the markets affordable, but once prices climb out of reach (and rates rise), many areas could experience a painful pullback. "We may even see prices go down year over in some high-flying markets," he predicts.
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