Markets & Economy

Are we in a housing bubble? Not even close, Trulia says

Trulia: Home prices are actually 7 percent undervalued

Though recent leaps in home prices may stoke fears of another bubble, the housing market is definitely not in one, listing site Trulia said in introducing "Trulia's Bubble Watch." Bubble Watch assesses the market's susceptibility to bubble conditions by comparing today's home prices with historical prices, incomes and rents. "Incomes determine how much people can pay for housing, and price increases aren't sustainable if they push prices too high relative to incomes," Trulia chief economist Jed Kolko wrote in a blog post. "Rents reflect how much people value housing even if they won't benefit from price appreciation (as renters don't, but owners do); the price-to-rent ratio is like the price-earnings (P/E) ratio for stocks." Trulia's Chief Economist Jed Kolko explains why he doesn't think recent home price increases indicate we're in a bubble market. Crunching those metrics, Trulia concluded that national home prices are actually 7 percent undervalued in the second quar...