Home sales are hot. Prices are climbing. Supplies are increasingly tight.
All these positive signs for the housing market are nice, but many wonder the same thing: Is this a new bubble, or what?
It's easy to see how today's housing market could trigger flashbacks to the frothy mid 2000s boom. Bidding wars are rampant, deals are quick, and investors and flippers abound.
But economists say there are plenty of reasons to be skeptical that the market is blowing bubbles. Homes are still undervalued. Banks are tightfisted with loans. And prices will likely cool before they burst.
There are still some strange signs afoot. But economists argue this is what an awakening market looks like, with the first signs of recovery at work.
"It's all part of this metamorphosis from the downtrodden housing market to something that resembles normalcy again," University of Central Florida economist Sean Snaith said.
"It looks like, as we're coming out of the depths, that there's a bubble forming, when really we're still trying to get back to the surface."
So what is a bubble? When home prices soar too high, too fast, and buyers can no longer afford the inflated values. They stop buying in an unsustainable market. Sales and prices plunge.
We're not talking about a slowdown or even a small reversal. Bubbles burst with disastrous results. Exhibit A: the local housing market circa 2007.
In Tampa Bay, median home prices peaked in 2006 at $245,000 after years of 20 percent gains. Lots of people were making lots of money selling homes at prices that didn't make a lot of sense.
Cue the explosion. In early 2011, the typical Tampa Bay home price bottomed out at $107,000. Hundreds of thousands of local homeowners were left with mortgages for far more than their homes were worth.
Fast forward to this year. April was Tampa Bay's busiest sales month in seven years. Deals are closing at breakneck speeds: More than 1,500 sales so far this year sprang from contracts signed within three days or less. And buyers aren't hesitating to pay full price.
"It's like the O.K. Corral. It's like '06 and '07 all over again," Keller Williams agent Scott Samuels said. "People are just paying crazy money."
It's hard, economists admit, to see a bubble from inside. They can span a nation or affect an area as small as a neighborhood, making them fairly hard to predict.
Some economists worry the recent flood of investors could distort the market. Fitch Ratings analysts last week called rapid price jumps "cause for concern."
"Prices seem to be being driven by something other than the fundamentals," like more jobs or higher wages, that traditionally steer a healthy market, senior economist Mark Vitner said. "I just don't think that's sustainable, or the kind of housing recovery we want to see."
But other economists argue the rebound looks so dramatic because of how deep the bust-era market sank.
They give five reasons why it's too soon to cry bubble:
1 Home prices compared with the peak? Not even close.
The typical Tampa Bay home sold in April for $150,000, an impressive $43,000 more than at the bottom, data from Realtors' multiple listing service show. But homes still sell for $95,000 below the peak.
Prices aren't everything, but they make a strong point that there's plenty of room to grow. Analysts with online listing service Trulia said Tampa Bay homes remain undervalued compared with historical prices, incomes and rents.
Adjusted for inflation, "real home prices are still pretty close to their historical average," said University of South Florida real estate professor Greg Smersh, who has researched three decades of local home-price behavior. "It's really too early to say that another bubble is emerging."
2 Good luck getting a loan.
A decade ago, banks pumped out lots of big loans and demanded little in return, like proof borrowers could pay them back.
That easy money has evaporated. During the bust, banks locked down on loans so tightly that even well-qualified hopefuls were turned away.
How tough is it to get a mortgage? The average loan-seeker who was rejected in March had a FICO credit score of 702, data from mortgage researcher Ellie Mae show. That's just four points below the average loan-seeker approved at the height of the bubble.
Lending has eased up a little. The average down payment dropped to 16 percent last month, according to mortgage exchange LendingTree, down from the strict 20 percent banks demanded for years.
But the people signing for loans today are often much more qualified, posing fewer risks that a mortgage will go bad.
"Everybody who is coming through and signing for homes is qualified out the wazoo," said John Heagney, a spokesman for several local builders. "They've got the income and the assets to back it up."
3 Cash reigns.
Half of the local home sales this year have been all-cash deals. In April, the piles of cash spent on homes totaled more than $220 million, one of Tampa Bay's heaviest cash months in a decade.
Who has that kind of dough? Investors, including local speculators and deep-pocketed financiers, now pounce on increasingly fleeting bargains to rent out or resell. Over six months, the New York-based Blackstone Group, a giant even among giant investors, spent more than $800,000 a day buying up Tampa Bay homes, a Times analysis found.
Flippers are also back in force, more so in Tampa Bay than almost anywhere else, research firm RealtyTrac said. More than 3,000 homes here were bought and resold within six months last year, with typical profits of about $30,000.
But unlike the amateur flippers of the last bubble, today's big investors aren't buying with heavy debt. That means less of a threat of a credit bubble or widespread mass defaults.
Those cash bets might come back to haunt investors. But economists said they won't pose the kinds of systematic risk that sent the last housing market over the cliff — and the nation into a recession.
4 Too many buyers, not enough homes.
Inflating a bubble takes tons and tons of sales, and today's home listings can barely keep up with demand. The time it would take the market to sell out with no new homes for sale has plunged to three months in Hills- borough, half what Realtors call a healthy supply. Tampa Bay saw 33,000 sales in the last year, compared with 40,000 over the same period in 2005.
Lots of homeowners who couldn't sell for years because they owed too much money are jumping back into the market as buyers. The rate of underwater Florida homeowners, CoreLogic data show, fell from 45 to 40 percent last year alone.
They're joined by buyers fired up because their rent prices are rising, they're becoming more confident in the economy, or they're afraid of missing out on cheap mortgages. Interest rates that sank to historic lows a few months ago are starting to climb: An average 30-year fixed loan just topped 4 percent, the highest in a year.
Buyers aren't just aiming for bottom-dollar homes, either. Bargain foreclosures and short sales traded at a loss, which accounted for most local home sales two years ago, are now only a third of the market, listing data show. People are seeking homes they can live in, agents said, and not just a chance for a quick buck.
5 No one expects a hard landing.
Economists expect several release valves will keep home values from overheating.
As prices rise, reluctant home- owners will finally opt to sell, adding homes to the supply. And if homes become too expensive, bargain-hunting investors will ease off buying or begin to sell.
Rising mortgage rates will make homes costlier to buy, slowing demand. But builders who froze construction during the bust are turning dirt again, helping loosen the supply.
Each change could help cool off big price gains and temper prices closer to their long-term trend. The market, economists said, has begun a transition period, clawing its way out of the hole.
"We're emerging from a historical period that was rife with outliers in terms of behavior and how things were functioning," Snaith said, "and now we're trying to transition back into something that's closer to normal — whatever that normal might be."
Contact Drew Harwell at (727) 893-8252 or [email protected]