Is another housing bubble on the horizon?

bubble graphicGraphic © the_lightwriter - Fotolia

Home prices continue to rise, and in some markets are now higher than they were before the housing meltdown.

That gives some housing experts some concern, while others don’t read too much into it. On CNBC’s “Squawk Box” recently, analysts were sharply divided. Ethan Penner, managing partner at Mosaic Real Estate Investors, attributed most of the dramatic price increases in some markets to the Fed’s low interest rate policy.

This policy, he concedes, has pushed up the price of homes, but he maintains it has also inflated the price of stocks and other assets.

But Shari Olefson, attorney and director of The Carnegie Group think tank, made the case for a growing housing bubble. She points out prices are inflating primarily because there aren’t enough homes for sale.

One reason for the lack of inventory, she says, is too many homeowners remain underwater on their mortgages, or have so little equity they couldn’t sell their homes is they wanted to.

12.7% still underwater

While the number of homeowners with negative equity is substantially lower than at its 2012 peak, Zillow reports there are still many who owe more than their homes are worth. In its latest Negative Equity Report, the real estate marketplace noted that 12.7% of homes with mortgages were underwater, translating into millions of homes.

The report shows that hard hit housing markets in Nevada and California have mostly recovered, and some of those areas have seen the sharpest price appreciation. Much of the negative equity is now centered squarely in the Rust Belt.

“When the housing bubble burst, the West Coast had more than its fair share of underwater homeowners,” said Zillow Chief Economist Dr. Svenja Gudell. “But the strong local economy and job markets have significantly helped these housing markets recover, and several are now more expensive than they were during the housing bubble. Other parts of the country didn’t get those same benefits, and until market fundamentals improve, homeowners and buyers in these areas will be facing disproportionately higher levels of negative equity as they navigate the housing market.”

Four of the 10 metros with the highest rates of negative equity are in the Rust Belt. Meanwhile, the West Coast is home to five of the 10 metros with the lowest levels of negative equity.

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