U.S. home prices rose by more than 12% in April, representing the second consecutive month of double-digit gains and the largest increase since February 2006, according to NewOak President and Co-founder James Frischling.
“It was only a year ago that talk of housing finding its bottom took shape. Now the market is talking about the potential of another housing bubble,” said Frischling.
Frischling added, “Low interest rates, tight inventories and the wealth effect generated by the strong rally in the equity markets are some of the key factors driving homes prices higher.”
Investors feeling a sense of urgency and pressure from rising interest rates are pushing homebuyers into bidding wars.
“While it’s clear that not all areas are being treated equally, in major cities, the demand for good properties is high and sellers are getting deals done quickly and often at a premium to their initial asking price,” said Frischling.
Many experts began to question the sustainability of the housing boom as prices began to spike despite the lack of improvement in both jobs growth and incomes.
However, from August 2002 to April 2006, home prices increased by double-digits for 45 consecutive months, so two months of consecutive 10-plus percentage point gains shouldn’t be alarming, noted Frischling.
Frischling added that the large amount of institutional money that was raised to be deployed in search of distressed properties are contributing greatly to the rally in prices in other parts of the housing market now that the deeply discounted investment play has been picked over.
“Wall Street, more than Main Street, is fueling this rally. With the amount of money being allocated to housing market, the call of a bubble is completely premature,” said Frischling.