Recent gains in home prices are unsustainable, but “it’s premature to describe the market as being in a bubble” as home values remain below their pre-recession peaks and prices are expected to continue to rise this year, according to a Standard & Poor’s report.
Home purchases made recently, “primarily with cash, are obviously bolstering prices,” the company’s researchers noted in their economic report.
“While some analysts may see this as an artificial—or at least atypical—support for property values, we don’t believe this will lead to overheating of the market,” the S&P researchers said in the report. “To be sure, prices may fluctuate a bit in certain pockets of the country (investor buying has so far been focused in areas that suffered the most, such as Las Vegas, California and Florida), but any widespread volatility seems unlikely, in our view. On the contrary, some large early leaps in value are natural, given that prices had probably fallen too far in many of those markets.”
Among the reasons S&P economic researchers said it appears supply pressures that have boosted home prices will be sustained at least through this year are the following: continuing bank foreclosure backlogs, borrower interest in taking advantage of relatively low rates before they
