Boom or bubble? Many in the media have written about a "housing bubble." But most housing economists quarrel with the use of that term. What's really going on with house prices?

Mortgage Banking, April, 2006 by Neil J. Morse

"I've been in this industry 30 years, and I've never seen a time when we've had such liberal underwriting," he asserts, explaining that "it has been made possible by securitization, and that game ends when investors in mortgage-backed securities [MBS] and asset-backed securities [ABS] throw up their hands and say losses are too substantial to continue to buy at [only] slightly higher yields."

But we haven't reached that spot, in part because home values have kept soaring, keeping defaults and delinquency rates in very comfortable territory. Borrowers in trouble, so far, have been able to sell their properties to the next wave of willing buyers.

The combination of a geographic debt concentration and an increase in products with little performance history has produced growing concern among some housing experts--especially because of the growth in speculative buying.

"Some people are buying in," says Crews Cutts, "believing that they can flip the property and make a killing. But those guys are probably going to lose their shirts ... sooner or later."

Perhaps, then, it is fitting that Las Vegas is one market where this gambling is heaviest. Crews Cutts says the tourist and gaming mecca is one of several U.S. markets near danger of overheating, as builders put up more condominiums than appears prudent.

Peculiarities appear elsewhere, as well. In Oklahoma, for example, homes still under construction are being bought for investment purposes by residents of Nevada--and Israel, according to an Associated Press report.

And Florida "is working off of a totally new economic model than any of us have ever experienced in the past," according to Yale author Shiller, who updated his book in 2005, likening the 1990s stock-market euphoria to the runaway real estate market of the 2000s.

To wit: "The can't-miss aura of real estate has helped nudge many families to invest more of their personal wealth in property by buying more expensive homes and taking on riskier mortgages--much as [earlier] workers used their 401 (k) plans to bet on company stocks," wrote Shiller.

Tamping down all the hand-wringing, Doug Duncan, MBA's senior vice president and chief economist--oft-quoted in the national media on the "bubble-or-not" debate--says, "We are returning to the 'normal' state of the housing market where average price rises in the presence of price declines in some markets, but increases in more markets. What has been abnormal in recent times has been the absence of any markets in which prices were declining."

Duncan notes that "broad-based house-price declines are typically preceded by a decline in employment, [and] since the economy is adding 2 million jobs a year, a national house-price decline is highly unlikely. We can find no instance of an interest-rate increase causing a house-price decline," maintains Duncan, who adds that "the fuss" over price fluctuations "has been generated by lack of understanding of the fundamentals of housing and housing finance markets," which he notes "ultimately [are] driven by supply-and-demand factors."