An informal Inman News survey of agents around the country shows many real estate professionals are experiencing market conditions that, at least on a surface level, resemble those of the housing bubble.

An analysis released today by Seattle-based brokerage Redfin highlighted key differences between today’s market and the last housing bubble, concluding that while “mini bubbles” may be brewing in a few cities, current market dynamics make it unlikely that national home prices are overheating.

Rising home prices and high demand are creating an environment that feels “bubbly,” Redfin said.

“The market today is so hot that many Redfin Agents are concerned that we’re entering into bubble territory,” Redfin’s Tim Ellis said in a writeup of the company’s analysis. “At a recent lunch with a half-dozen Redfin Agents, Redfin CEO Glenn Kelman asked whether they felt that the market was getting bubbly. They all nodded vigorously.”

But in contrast to conditions during the housing boom, credit standards are rigid and a disproportionate share of home sales are all-cash purchases, Redfin said, noting that price gains are not exceeding income gains and that listings are in short supply.

“Nationwide, we’re not in a bubble,” said Kelman. “Too many sales have been all-cash for people to get in over their heads, and sales volume is still nearly 40 percent below the 2005 peak.”

While there may not be a national bubble, Kelman said Redfin’s analysis suggests some local markets may be overheating.

Markets like Washington, D.C. and Los Angeles, where Kelman said prices have increased more than 25 percent faster than incomes since 2000, “could be vulnerable as interest rates increase over the next year. Just in the past few weeks, we’ve seen buyers using more aggressive loans, appraisals getting looser, and almost every sale turn into a bidding war. Even as the investors who were so active in 2012 start to pull back, others willing to pay more seem to be taking their place.”

Redfin also characterized San Francisco and San Diego as being among the four “most bubbly” markets out of 15 analyzed. The “least bubbly” markets were Atlanta, Chicago, Las Vegas and Dallas.

Read Redfin’s top 10 list of “mini-bubble” real estate markets.


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