A new study by researchers at Columbia University and the University of Pennsylvania’s Wharton School suggests that housing prices in San Francisco are NOT overvalued. The study, titled “Assessing High Housing Prices: Bubbles, Fundamentals and Misperceptions”, points to “basic economic factors, including low interest rates, strong income growth and abnormally low prices in the mid-1990s”, rather than a “speculative frenzy”, to explain the recent run-up in prices.
The report did not include data on condos or second homes and the researchers “acknowledged that higher interest rates could squeeze prices, particularly in expensive, volatile markets.”
On the flip side, and a bit closer to home, “Ken Rosen, an economist at UC Berkeley, estimates that speculation accounts for 10 to 20 percent of the market activity nationwide.” And “[w]hen mortgage interest rates increase — as he expects them to do within 18 months or so — as credit standards tighten and investors flee prices in the Bay Area could decline by as much as 15 percent in the market”.
Either way, perhaps our nohousingbubble.com domain name just became a bit more valuable…
· Bubble won’t burst [Chronicle]

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