If you tried to buy a home in Phoenix a year ago, you probably would have been able to land it for well under the asking price.
Those days are gone. In a city that was hit hard after the housing bubble burst in 2007, you're now more likely to encounter a bidding war for that split-level ranch on the cul-de-sac you had your eye on.
Prices have leapt 20 percent in the past year in Phoenix. Real estate agent Tucker Blaylock said they will keep rising as long as interest rates remain near historic lows, thanks to the Federal Reserve.
"You can borrow money so cheap; it's really pushing prices up," he said. "A year or two ago, a buyer could bid $20,000 or $30,000 under the list price and have a shot at getting it. Now sellers want list, or in some cases they get multiple offers and it'll go above list price."
Nationwide, home prices are on a powerful roll, never mind the slight tick up in interest rates recently. And that momentum is dragging potential buyers off the fence, which is, in turn, feeding the higher prices.
Experts say while the housing market is percolating in many places around the country, we're a long way from seeing the bubble burst. A variety of factors—the large number of underwater homes, the wariness of buyers to plunder their homes' equity, rising interest rates—are acting as a counter-weight to the rising demand.
The latest monthly data from the widely followed Case-Shiller index showed home prices in May jumped 12.1 percent in the past year, with even bigger gains in some red hot markets.
In a handful of those metro areas, housing is looking downright "bubbly," according to Robert Shiller, co-founder of the index.
"The cities that bubbled in the past are bubbling again," he told CNBC. "To me, it's seems partly psychological. They've seen it before and they're ready for it again."
(Read more: US home prices jump in April, setting record)
But unlike the historic mid-2000s bubble, there are signs the latest price surge is more sustainable. One is that the mix of buyers is shifting from bottom-feeding investors to homeowners who plan to stay awhile. In Phoenix, "hot money" investors are cooling to new purchases even as prices keep rising, said Blaylock.
"It scares the guys who have been flipping stuff in the $100,000 to $200,000 range that now they'll have to pay 350," he said.
And unlike the last bubble, mortgage lenders are much choosier when reviewing loan applications than the days when just about anyone with a pulse was approved.
Prices are also rising because the supply of homes for sale is getting tighter. Banks have shed much of their backlog of foreclosed properties. A four-year drought in home building, which is now beginning to ease, cut deeply into the supply of new homes.