Many spreads remain above levels they reached through much of the 1990s, and while they may be thin, they do not appear to be clearly unreasonable in the context of recent and expected developments. Warnings about a possible “bubble” in house prices have been sounded for a number of years now.
About a year ago, I examined this issue in some detail and concluded that, while one could never be very confident about such a judgment, house prices were not obviously too high and the housing stock was not clearly too large.1 Since then, however, prices have climbed further, and by more than the rise in rents - a proxy for the return on houses.