With record-setting Houston home sales, the latest "Bubble Watch" report from real estate website Trulia reveals homes are increasingly overvalued here. According to data released earlier this month, homes in the Houston area are the 8th most overvalued in the nation.
The two Texas cities in the top 10, Austin and Houston "are the only metros out of the 100 largest that look more overvalued today than in 2006," notes Trulia.
Houston home prices were overvalued by 8 percent in the third quarter of this year, Trulia reports. That's a sharp increase from the site's report released last quarter that stated that local home prices were overvalued by 5 percent. In comparison, Houston-area home prices were overvalued by 1 percent in the first quarter 2006.
The year-over-year change in asking price from the third quarter of 2013 to the same period in 2014 indicates an increase of 10.4 percent in Houston's housing market. According to Trulia, "price gains in overvalued markets are a sign that we’re headed for danger."
Austin currently tops the list of metro areas where home prices are most overvalued, jumping to the the No. 1 spot from No. 5 in the second quarter.
California metro areas dominate Trulia's latest report, but the two Texas cities in the top 10, Austin (No.1) and Houston "are the only metros out of the 100 largest that look more overvalued today than in 2006," notes Trulia. That's because "Texas markets avoided the worst of the housing bubble during the past decade. Recently, they’ve had double-digit home-price increases," the site explains.
Although certain areas like Austin and Riverside-San Bernardino, California have witnessed "big price jumps" in recent months, overvalued markets in general have not seen larger price increases. So, Trulia concludes that "bubbles should not be our top housing worry today." Instead, the site points to "weak construction" and "subpar young-adult employment" as red flags.
CultureMap writer Elizabeth Rhodes contributed to this story.