After the bursting of the biggest housing bubble in history, it’s incredible to think that we could repeat our past mistakes so quickly. But that’s just what might be happening.
Yale economist, Robert Shiller, when asked recently by Fox Business News if he thought a housing bubble was re-developing, said, “I think in cities like Phoenix and San Francisco, we might be seeing something pretty big developing. People there are very speculative-minded.”
By pushing for a housing recovery with artificially low rates, is the Federal Reserve contributing to another bubble?
Across the nation, U.S. home prices have been edging higher and showed an average increase of 2.2% in May over April across 20 major cities, according to the S&P/Case-Shiller index. (See chart below)
Phoenix posted the best annual return and average home prices in the region were up 11.5% versus May 2011. It was one of the hardest-hit cities in the meltdown, and despite one-year gains, prices are still more than 50% below their June 2006 peak.
Home prices in San Francisco edged higher by 0.6% over the past year. The region has been helped by another technology boom – this time with mobile-application developers and social networkers. Workers flush with cash are bidding up home prices.