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Is Housing in Houston Entering a Bubble?

by Peter Thomas Ricci

The housing market has seen strong price gains through much of 2013, but has it grown too rapidly here in Houston?

Let’s start with the good news: there’s no way that the national housing market is in a bubble. According to the latest Bubble Watch from Trulia, home prices are still 4 percent undervalued to their fundamental level in 2013’s four quarter; for comparison’s sake, home prices were 39 percent overvalued in the first quarter of 2006.

But what about here in Houston? Well, that’s where things become a bit more nuanced. Home prices in the Bayou City, Trulia reports, are actually 6 percent overvalued, and Houston is one of the top markets that Trulia fears could be entering bubble territory.

Vickey Wachtel, however, the broker/owner of Imagine Realty International in Katy, said she does not see a bubble developing in Houston, and for one simple reason – the strong foundation supporting the city’s housing market.

“What we are experiencing is a real demand for housing that is forcing the prices up and over the market value in many areas around Houston,” she said. “This demand is being fueled by the healthy job market we have, and the low cost of living we enjoy. The prices are rising and to a level few areas have seen before, but not to the level that would cause fear…not yet.”

So where does our market compare with other large metro areas? See our graph below to find out:

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