Home prices are overheating again. In fact, twice as many metropolitan markets were considered "overvalued" in the second quarter of this year as compared to the first three months, according to a new report from CoreLogic. That is, prices are inflated relative to incomes. This is not, however, a "housing bubble," because by definition, an economic bubble eventually bursts, and home prices are very unlikely to fall.
"Just because you're overvalued doesn't mean that you're in a bubble or there is an impending crash. Some markets are overvalued because of strong fundamentals," said Sam Khater, CoreLogic's deputy chief economist.
Home prices in 14 of the top 100 U.S. markets are now above the long-term fundamental value for that market. Six of these markets are in Texas, where strong job and income growth has fueled housing demand over the last decade. Even with oil prices falling, housing demand is still robust and supply is near record lows. Home construction is at levels last seen in the 1980s in Houston, but the population is now double that. Home prices will likely moderate, but the Texas economy is currently too strong to suggest any kind of price crash.