Are Home Prices Rising Too Fast?

Just 1.82 million homes were listed for sale in December, according to the National Association of Realtors. That is a 22 percent drop from a year ago and the lowest supply since May of 2005, when words like "boom" and "bubble" followed the word "housing." At the current sales pace it would take just 4.4 months to sell those homes.

In Coronahome prices rose 7 percent year over year in December with a huge 60 percent drop of homes for sale. In December 2011 there were 1,375 active listings, this past December 2012 there were only 556 active listings.

- For San Bernardino/Riverside Countieshome prices rose 22 percent year over year in December with a 43 percent drop of homes for sale. Jeff Menendez

The reasons for the low supply are varied, and the low numbers are in fact feeding on themselves. If potential buyers can't find something to their liking, they will probably not list their homes for sale.

As a result, home prices are now rising more and faster than most analysts predicted due to this short supply, up 7.4 percent year-over-year in November, according to CoreLogic. They are especially surging in some of the hardest hit markets from the housing crash, where large-scale investors are swarming with cash in hand.
Healthy housing market gains are historically driven by increasing employment and income, not by lack of supply; the latter leads to price bubbles. First-time home buyers, who generally account for 40 percent of the home-buying market or higher are still under-represented at just 30 percent.

Rising home prices are not the sole measure of a healthy market. Supply and demand need to fall closer in line, and a robust economic recovery should be driving both home sales and prices.

New Housing Fears: Home Prices Are Rising Too Fast:

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Published: Tuesday, 22 Jan 2013 
By:  - CNBC Real Estate Reporter

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