With recent increases in home prices both nationally and in a few cities such as Phoenix, some are wondering if another bubble is possible. The Financial Times reports rising prices in Arizona are leading buyers to bid five percent over asking prices while the New York Times cites concerns about the return of structured investments and mortgage securitization. Despite the rise in prices in recent months, the bubble talk is likely to be overdone. As noted in the Financial Times, roughly half the home sales currently are all cash compared to 2006 when not only were all cash sales less common but 25% of sales were with no down payment at all. As the chart shows, the ratio of home prices to disposable incomes — based on the S&P/Case-Shiller 10-City Index and the US Bureau fo Economic Analysis data on incomes — home prices scaled by income are still mdoerate.
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