Home Prices Justified by Fundamentals? Or Are Things Getting Bubbly?

Posted To: MND NewsWire

In the last four years housing prices, according to CoreLogic's Home Price Index (HPI) have risen 40 percent. So, are we heading toward a repeat of the 2005-2006 housing bubble? In a two-part analysis in the current issue of CoreLogic's MarketPulse , Mark Liu, principal economist, offers some reassurance . First he defines just what a bubble is, using the words of Nobel Laureate Economist Joseph Stiglitz. " f the reason that price is high today is only because investors believe that the selling price is high tomorrow - when 'fundamental' factors do not seem to justify such a price - then a bubble exists." Under that definition Lieu says, the high price growth rate alone is not evidence of a housing bubble . Instead one must identify fundamental factors in housing markets and see whether the...(read more)

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