“While the combination of rapidly rising home prices in some areas, tight inventory nation-wide and the prospect of rising interest rates certainly warrant close scrutiny, a housing bubble in the immediate future is unlikely, says Kiplinger’s Associate Editor, Gillian White. “Areas such as Phoenix and Las Vegas are seeing price spikes of over 20 percent but home values in those same areas remain more than 40 percent below their peak values and interest rates remain low in comparison with historic averages.”
“When rates do begin to rise, the climb is likely to veer more towards slow and steady rather than rapid and steep. More homeowners will make their way out of underwater mortgages, increasing inventory. And gradually rising rates will cool housing demand, providing a better market equilibrium. If the economy continues to expand, as anticipated, it will give the housing market time to work out some of the concerning patterns that have taken root and likely prevent bubbles in most markets.”
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