Residential real estate prices nowhere near bubble

Anyone trying to buy a home in Massachusetts may have noticed that residential real estate prices are up from recent years, and people trying to sell their homes may be encouraged by rising listing prices. Some people may fear that rising prices are setting local economies up for the fallout of another market crash. Others may have confidence that the positive trend in home prices is a sign that the country is making economic progress.

An expert on residential real estate has offered an interesting analysis on whether current housing market trends will lead to another bursting real estate bubble. He explains that a housing market and its likelihood to burst should be judged based on fundamental value, which involves considering the economic factors of supply, demand and speculation on future trends. Noting that dangerous markets develop when prices rise and people rush to get into the market leading to an extreme increase in demand for properties, the expert claims that current prices and demands are well within the safe limits of the national markets’ fundamental values.

There are exceptions to this trend. For example, several residential real estate markets in California are experiencing housing prices higher than their fundamental values. Fortunately for buyers here in Worcester, the expert has not identified any Massachusetts communities as suffering such a fate.

According to this story, Boston-area homes are currently undervalued, which may present some exciting residential real estate opportunities for new buyers. Staying informed of local and national housing market trends can help buyers make confident decisions regarding real estate and can prevent them from being taken advantage of by sellers who have overvalued their residential properties.

Source: Forbes, “Trulia Bubble Watch: Today’s Rising Home Prices Are A Rebound, NOT A Bubble,” Jed Kolco, May 14, 2013