bubbleEarlier this summer, we considered news reports saying that the rebounding California real estate market might be facing a bubble. Proponents of this theory said that prices were rebounding too hastily and too sizably to be anything but an overcorrection, but skeptics who studied the numbers argued that a bubble looks a lot different than the situation we’re in now.

An intriguing new report from HousingWire advances this argument, suggesting that the continuing “bubble” narrative is more media myth than market phenomenon. The author, Rick Sharga, offers several reasons why, including:

Reason #1: Home prices are about where they should be. The folks at Zillow put out an interesting report showing that if we hadn’t gone through the boom and bust cycle, and home prices had simply risen at the historic average of about 3.6% a year, they’d be almost precisely where they are today.

Reason #2: We’re experiencing a bounce, not a bubble. According to Case Shiller, home prices fell by about 35% from peak to trough. The same index is reporting a 13% year-over-year increase. On average, prices are still off by more than 20% from the peak. And the markets experiencing the highest levels of price appreciation are the markets that suffered the most dramatic price depreciation during the bust – cities that saw values fall 40%, 50%, even 60%. The current increases are indicative of markets returning to normal.

Emphasis on that last part is mine. As I’ve mentioned, perspective is crucial whenever gauging the health of any real estate market, but in Sacramento — where we’ve seen the most dramatic appreciation in the country over the last year — it’s truly essential. Read the rest of the column here, and contact me today about how you and your property can take advantage of the bounce as well.

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