“Buyers face a dilemma: pay more today, compared with a year ago, or pay even more tomorrow”

Is the Federal Reserve’s success in driving down interest rates giving the housing market a sugar high?

This is the question posed by Nick Timiraos today in the Wall Street Journal online.

Reasons for the strength in home prices include:
– Inventories have fallen to 20 year lows
– Many homeowners aren’t willing – or able – to sell at prices that are, nationally, still down sharply from 2006 highs
– Demand has revved up
– Improving home-price expectations have unleashed pent up demand, as household formation in the last five years was lower than at any period since the 1960s

Result? Prices are rising as buyers say “If I’m going to get in I better get in now”.

Is this the beginning of another bubble? Not according to the experts quoted in Timiraos’ article, as prices are still below long-run averages relative to income.

I covered several of these points in my post on March 17:
How Much Will Home Prices Increase this Year

Here’s Nick’s article in full.
Jump in Housing Prices Stirs New Worry