Is There a New Bubble Forming in Housing?

The question many are now asking is whether or not we are headed to another bubble in home prices. Most experts believe that we will begin to see prices stabilize to more modest levels of appreciation over the next few months. For example, the most recent Home Price Expectation Survey calls for 4.3% appreciation in home values for 2014. (You can get more details of the survey in the November edition of KCM).

But what happens if prices do continue at the current levels of appreciation?

Fitch Ratings addressed this issue in a recent report. They placed each state into one of three categories:

1.)  Undervalued – States where current levels of appreciation are below what the market can bear. There is no chance of a bubble forming.

2.)  Sustainable – States where current levels of appreciation can continue with little fear of a bubble occurring.

3.)  Unsustainable – States where prices will be overvalued if current levels of appreciation continue.

Here is a map of Fitch’s findings:

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