Yes, according to 3 top business schools ..
… in a study of 46 housing markets from 1980 to the end of 2004, by researchers at Columbia Business School, the Federal Reserve Bank and the Wharton School of the University of Pennsylvania: most U.S. cities show minute indication of a housing bubble.
Home-price increases are commonly explained by economic factors: for instance - income escalation, low house prices and interest rates in the 1990s, The study, “Assessing High Housing Prices: Bubbles, Fundamentals and Misperceptions,” found zero evidence that buyers are in bidding wars to raise the prices based on unrealistic assumptions of future value increases.
The usual data for assessing the market such as price-to-rent or price-to-income ratios overlook the effects of lower real, long-term interest rates, failing to correctly reflect the state of housing costs.
The study wanted to drive out what it called common misperceptions, such as:
Misperception #1: The rising cost of housing means that owning has become more expensive.
The price of a house is not the same as the annual cost of owning a house. When calculated the actual cost of owning, then comparing to rents and incomes and found that these ratios were historically reasonable for 2004.
According to the study, during the 1990s, housing prices were moderately undervalued, and some part of the price boost since then shows a return of these appraisal ratios as similar to past averages.
Misperception #2: High price increases, implies a bubble.
When the cost of long-term borrowing is low, changes in long-term interest rates have an excessively large impact on house prices. With the decline in long-term interest rates since 2000, it is not uncommon that house prices have risen as much as they have.
The other theory is that the market may be particularly vulnerable to unanticipated future rises in interest rates or harmful events to local economies.
Misperception #3: The cities with the highest price increases including the price-to-rent ratios are the mainly overvalued areas.
Cost of home growth has bypassed the U.S. average rate of appreciation for at least 60 years, in a few housing markets like, San Francisco, Los Angeles, San Diego, New York and Boston,
In cities with higher long-term rates and price appreciation, the annual cost of owning is lower; consequently house prices should be higher (relative to rents or incomes).
At the same time house prices in high-priced cities are more sensitive to real, long-term interest rates in that interest expense is a higher fraction of annual ownership costs
The studies conclusion? Current national home values are steady with a strong economy.
The reduction in ownership costs due to lower long-term interest rates has for the most part offset the rise in housing prices. The caution is that when real, long-term interest rates are already low, additional changes in rates can have a large impact on the housing market.
An unexpected rise in real estate interest rates or a negative occurrence to household incomes could cause house prices to decline. Confused yet? This does not mean though that today all houses are regularly overpriced.
