With all the press on housing bubbles, we thought we would clarify a few things. In the past, the home-building industry has been prone to two types of housing bubbles: 1) Price Bubbles and 2) Supply Bubbles.
1. Price Bubbles generally occur in the expensive, supply-constrained markets, such as California and the Northeast. Builders in these markets can’t meet demand, so surges in demand tend to result in years of rapid price acceleration.