Home prices rose at their fastest pace in seven years in August, according to the S&P/Case-Shiller home price indexes, but one of the widely watched indexes' creators claimed homes are still affordable, and there is no national price bubble.
"I define a bubble as a time when people have extravagant expectations, and the expectations are driving home price increases," said Robert Shiller, Case-Shiller index co-founder and Yale University professor of economics, in an interview with CNBC. "We don't have the mindset of earlier this century."
Home prices are not being driven by extravagant expectations, as they were in 2005 and 2006, but by historically low inventory and strong investor demand. Sales, however, are beginning to fall off, as indicated by the latest pending home sales report from the National Association of Realtors. It showed a nearly 6 percent drop in signed contracts to buy existing homes in September from the previous month.