As home prices continue to rise throughout most of the nation, sooner or later people begin to wonder whether we’ve crossed the threshold dividing undervalued from overvalued. Pundit shorthand for “overvalued” has gradually become almost synonymous with the far more fear-inducing term, “Bubble.” As with the chewing gum and soap-blowing varieties, the term can’t help but conjure up visions of the associated “Pop!”
Just worrying that we are in a home pricing bubble can cause sleepless nights and worse — financial paralysis. As home prices in Kenai Peninsula Real Estate move higher, it’s natural to wonder if they are truly justified by economic fundamentals. While no one wants to be on the other side of wrong, no one wants to miss great deals on Kenai home prices, either. How to know?
Bubbles are notoriously hard to define, but to address the issue, the Trulia real estate web site has just come out with a new tool designed to assess whether today’s home prices — including those in Kenai — are overvalued or undervalued. They compare the latest prices with historical incomes, prices, and rents.
The first findings are reassuring. Although residential price gain percentages do rival those of the last decade’s bubble, that’s deceptive. They started from a much higher perch. The decline from 2005-2006 was steep enough that (aside from a few metro areas in California and Texas), the fundamentals show that the current gains look a lot more like a rebound than a bubble.
Trulia found that as of last month, national home prices remain undervalued by 7%. During last decade’s bubble, prices went as high as 39% overvalued. Their takeaway is that home prices remain considerably lower than they were during the last bubble.
So bubble-watchers can rejoice or rebel, but as far as this Kenai agent is concerned – Trulia has provided some very pleasant news. “Rebounds” bring about visions of happy kids on trampolines (and rebounds don’t pop). The news is excellent for instilling a positive national outlook, but more locally, if you’re looking for the latest information about Kenai’s home prices and activity, contact me for a no-cost, no-obligation consultation.