As of March 2016, the Case-Shiller national house price index was at 97 percent of the February 2007 peak. That may seem like alarming news at first as we all know what happened after this housing bubble peak was reached, but just because we are reaching the same peak doesn’t mean the same outcome will follow.
Currently, this new level is in line not with an impending housing collapse, but with longer-term trend growth, according to the NAHB’s Eye on Housing blog. However, because housing markets are local and different markets experienced very different rates of appreciation during the housing boom, the proximity to previous peaks also means different things in different markets.
For example, home values in Denver and Dallas have already exceeded their mid-2000s levels but because the markets were some of the most stable during the boom and had the smallest increases and shallowest declines, the new peaks shouldn’t be seen as warning signs of forthcoming bubble conditions.
Boston, Charlotte, N.C., Atlanta, Cleveland, Detroit, Minneapolis, New York, and Chicago are other markets were current price peak proximity reflects house price recovery, not bubbles.
Markets like San Francisco, Portland, and Seattle cannot say the same thing. These markets are near their previous peaks, but the peaks were inflated greatly during the boom. Supply and demand imbalances are re-inflating price bubbles in these markets.
Las Vegas, Phoenix, and Tampa are three metros that have some of the largest gaps between current and peak house prices. This can be seen as good news since these markets were some of the most overheated during the boom, but they appear to have not forgotten the past and, thus, are not doomed to repeat it.
For the full analysis and for accompanying graphs and charts, click the link below.