And it's making us nervous about buying property

The experts tell us we won’t know whether we’re experiencing another housing bubble until that bubble bursts.

It’s hard to ferret out prices that are legitimately driven higher from those that are artificially inflated by demand and unjustified speculation. Even the economists can disagree.

What we do know is that housing values are at an all-time high — higher than right before the last bubble burst. And more homeowners and home buyers are saying that they suspect the housing market is overheated, more than said so just three months ago, says the latest survey from ValueInsured, a provider of down payment protection if the market dips.

Cautious homebuyers

But what does that mean for the average Joe?

It depends on if Joe, or Jane, is buying or selling a home or perhaps wants to borrow money based on home equity.

The people who are watching this most closely, not surprisingly, are those who are ready to buy a home.

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No one wants to “buy high” and then see the market correct.

“This is especially true for millennials, who are more likely to switch jobs, relocate or need to upsize in the next few years, “ said Joe Melendez, CEO of ValueInsured. “No one wants to buy at the peak and find themselves underwater as so many did a decade ago.”

If you pay top dollar for your house and then next month the bubble bursts, you can wind up owing more on the house than it’s worth. Sell and you sell at a loss that may not even cover what you owe.

This also makes it tough on anyone who wants to borrow money based on the value of their property via a home equity loan or line of credit. The more value in the home, the more room to borrow. When you owe more than the value, there’s nothing to borrow against.

Eventually you can wait it out and value typically returns. In 2012 after the Great Recession, one in three homeowners were underwater, Zillow reports. With the current rise in value, only about one in 10 have what it technically called “negative equity.”

Optimistic sellers

On the other side of the equation we have sellers.

Right now home values are high, Zillow reports.

Nearly half of the nation’s homes are worth more today — on average about $4,100 more — than they were at the onset of the Great Recession more than a decade ago.

That’s likely why more than eight in 10 homeowners think now is a good time to sell, a 9-point jump from last quarter, says ValueInsured’s survey. And selling high works, unless you want to turn around and buy a new home in an equally hot market.

Some places are hotter than others.

According to Zillow’s look at the 35 largest U.S. metro areas — Seattle, Dallas and Tampa, Florida reported the greatest year-over-year home value appreciation between July 2016 and July 2017. In Seattle, home values rose almost 13 percent over the past year to a median home value of $450,900.

Some factors in those rising prices? Home shoppers weren’t finding a lot of options this summer, with 13 percent fewer homes on the market than a year ago. And more folks may have been drawn into the hunt in July because mortgage rates were down to their lowest point since May — clocking in at 3.74 percent, making it more affordable for those looking to buy.

Zillow’s chief economist Svenja Gudell had this takeaway: “Home values are high, but affordability – while suffering a bit lately – is still okay, largely because of very low mortgage interest rates helping to keep monthly mortgage payments in check.”

“Bidding wars and homes selling for over asking price have been common themes in many markets this summer, and continued competition in the face of limited supply will only continue to push home values up going forward,” Gudell said. “Home shoppers that were hoping to buy this summer but haven’t yet found their dream home may have better luck once September and October roll around, when we can expect to see more homes coming online and less competition.”

And if you’re still worried that all of this may be the prelude to a recession, Debt.com has this advice on how to recession-proof your finances.

Meet the Author

Michelle Bryan

Michelle Bryan

Social Media Director

Bryan is the social media director for Debt.com.

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Article last modified on September 25, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: We’re Not Sure If We’re In A Housing Bubble - AMP.