housing recovery
Signs of new housing bubble in several areas
May 17, 2013: 10:15 AM ETCities in California and Texas are already seeing the early signs of a housing bubble.
Austin, Texas
FORTUNE – Only a year after the U.S. housing market hit bottom, it may be bubbling up -- again. Odd as it may seem, some economists warn the steady rise in home prices, at least in some markets, are inflated and could eventually pop.
Prices nationwide rose nearly 6% last year -- more than most ever expected. While that has continued so far this year, leading builders to build again, prices in some places have risen faster than incomes. Eventually, they could fall back as homes become less affordable.
"If prices keeps going up at this rate for another six months, we will have a bubble, and people will get hurt," Dean Baker, co-director of the Center for Economic and Policy Research recently told Bloomberg.
The housing market may or may not be approaching bubble territory, but a handful of cities have certainly seen home prices soar beyond market value, according to Trulia, a San Francisco-based real estate data company. Of the largest 100 metro areas, Orange County, Calif., appears to be the most overvalued, with prices 9% above Trulia's estimate for fair value. Los Angeles homes are 5% overvalued, San Jose is 3%, and San Francisco real estate is 2% above fair value.
MORE: Mortgages are investment du jour for hedge funds
And even though Texas's biggest cities largely avoided the last housing bubble, markets there are also heating up. By Trulia's estimates, prices in Austin are 7% overvalued; they are 5% above fair value in San Antonio and 2% overvalued in Houston.
Indeed, prices across many parts of the country are rising just as rapidly as they did during the bubble years of 2003, 2004, and 2005, but the housing market is still far from bubble territory.
Trulia's economist Jed Kolko says when comparing what traditionally drives home prices, such as rents and incomes, the overall housing market is still undervalued by about 7%. This of course is a big improvement from the bottom of the downturn in late 2011 when prices were undervalued by 15%, but prices are far from the peak of the housing bubble when homes were overvalued by 39% in early 2006.
Some markets are clearly inflated, but there are plenty of big reasons why it's unlikely that buyers will see prices soar that much higher. With the unemployment rate at 7.7%, joblessness has held back many would-be buyers. And while more borrowers are being approved for new mortgages, lending standards at banks remain tight.
And despite big increases last year, home prices in Las Vegas and Detroit are among the most undervalued, according to Trulia. At best, the recovery is choppy. So the bubble that some fear may very well deflate before trouble abounds.
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Mortgages are investment du jour for hedge funds
At a confab of big money managers, the hottest topic was the home loan market. Scared yet?
FORTUNE -- In less than five years, mortgages have gone from toxic to tonic.
It's the same life span as the annual hedge fund conference SALT, where many of the top professional managers met last week to talk investments, hear speeches from luminaries like Al Pacino, and generally have a good time. In all, Las MORE
Stephen Gandel, senior editor - May 13, 2013 7:00 AM ET -
Sam Zell says sell
Legendary investor says stock market is in state of "euphoria," while economy is still in the dumps.
FORTUNE -- At least one notable investor thinks we may be in bubble trouble again.
Sam Zell on Thursday at the SALT hedge fund conference in Las Vegas said stocks are due for a fall. The legendary real estate investor thinks the market is out of touch with what is really going on in the MORE
Stephen Gandel, senior editor - May 10, 2013 9:02 AM ET -
FHA's solvency plan isn't fair
The government insurer, which may or may not be in need of a bailout, plans to generate $10 billion by locking middle class borrowers into high fees for decades.
FORTUNE -- This is what you call kicking 'em when they're down.
Consumers who don't have a lot of cash to put down when buying a house usually have to pay a higher rate than typical borrowers for the first few years of MORE
Stephen Gandel, senior editor - May 2, 2013 1:16 PM ET -
New home sales: Poised to double?
More good news for the housing market.
By Joshua Steiner, Hedgeye
FORTUNE -- The chart above shows the ratio of new home sales to total sales historically back to 1999. Currently, new home sales are running at 7.8% of total sales. From 1999 to 2005, new home sales averaged a fairly consistent 16% of total sales. The low watermark was 5.5% in May 2010.
The trend in new home sales as a MORE
Apr 25, 2013 12:47 PM ET -
Behind the foreclosure surge in New York, New Jersey
How did New York and New Jersey jump to the top of the foreclosure list, behind only Florida? Red tape.
FORTUNE – Just as most of us believe we've seen the worst of the housing market's collapse, two unlikely states are only now getting hit with a wave of foreclosures: New York and New Jersey.
The region was largely spared when home prices disastrously tumbled in 2007. New York and New Jersey, MORE
Nin-Hai Tseng, Writer - Apr 15, 2013 6:00 AM ET -
Investor frenzy over housing has peaked
Signs that the big money has retreated from the foreclosure boom may be good for the housing market overall.
FORTUNE – When the U.S. housing market crashed in 2007, millions lost their homes to foreclosure. With their finances in shambles, they picked up the pieces by renting rather than buying. Big institutional investors quickly caught on, snapping up foreclosed properties on the cheap and renting them out.
All this has helped drive MORE
Nin-Hai Tseng, Writer - Apr 5, 2013 5:00 AM ET -
Freddie Mac and Fannie Mae: Too little, too late for struggling borrowers?
Lending giants Freddie Mac and Fannie Mae are swooping to the rescue just as the housing market turns the corner.
FORTUNE -- Freddie Mac and Fannie Mae announced this week they were making it easier for struggling borrowers to lower their monthly payments. No longer will borrowers who are at least 90 days delinquent have to prove hardship, as the mortgage giants will waive previous requirements that called for documents detailing their MORE
Nin-Hai Tseng, Writer - Mar 29, 2013 10:51 AM ET -
Why higher mortgage rates will help the housing market
Borrowing is still relatively cheap, so more potential homeowners may dive into the market.
FORTUNE – Mortgage interest rates have been rising on signs that the U.S. economy is improving. Last week, the 30-year fixed rate reached the highest level in more than six months, climbing to an average of 3.63%, compared with 3.52% the previous week and 3.92% a year earlier. The current rate is the highest it's been since MORE
Nin-Hai Tseng, Writer - Mar 18, 2013 10:57 AM ET -
A sign the housing recovery just might stick
Mortgage applications were higher again in January. If individual buyers dominate home sales as opposed to investors, we might see a more sustainable housing recovery.
FORTUNE -- Investors armed with cash have largely driven the recovery of the U.S. housing market to date, but a few signs suggest that trend may be easing up. For the past five months, applications for new mortgages have risen, suggesting that regular buyers may be MORE
Nin-Hai Tseng, Writer - Feb 8, 2013 10:34 AM ET
