A new report by Financial Planning studies the housing markets at danger for a bubble during the summer.
The report, which studied markets with a minimum population of 100,000, at least 100 quarterly home sales, and a median sales price above the national rate of $255,000, found Hawaii County, Hawaii, to be most at risk to face a bubble.
Hawaii County has a media home price of $403,625 and annual wages of $43,810. Bristol County, Massachusetts, came in at No. 2 with a median sales price of $300,000 and median wages of $50,973.
Abermale County, Virginia came in at No. 3, followed by Cowlitz County, Washington, and Skagit County, Washington.
Also included in the list was Weber County, Utah; Butte County, California; Forsyth County, Georgia; Ada County, Idaho; and Dutchess County, New York.
Although these markets could face an issue in 2019, a report by Black Knight in June states that the current demand for houses is largely driven by families seeking to purchase homes and not by speculators, which, according to the Urban Institute, means that we are at less risk of entering a housing bubble.
“Investment-driven demand for housing returned in 2012 as buyers with strong credit profiles and deep pockets snapped up millions of foreclosed homes at rock-bottom prices,” Andrew M. Neal, Urban Institute Senior Research Associate said. “Not surprisingly, peak growth of the investment component in 2013 (4.2%) far outpaced the consumption component (2.2%), although to a lesser extent than during the bubble.”
Home prices slowed from 6.8% year over year growth in February 2018 to 3.6% in March, while home prices have hit historic highs in nominal terms. This means the return for investment for homeowners has been small, and a family buying a home at today’s prices will do slightly better than inflation, however, they shouldn’t expect outsize equity gains.
CoreLogic’s latest Home Price Index (HPI) revealed national home price rose 3.6% year-over-year in May 2019.
The report adds that CoreLogic is forecasting prices to increase 5.6% from May 2019 to May 2020. The May 2019 gains was lower than the 6.4% increase of May 2018, but a slight increase from March 2019’s 3.3%.