Reno's housing prices haven't reached the point where they're a speculative bubble, but they're as close as they can be, says a study released last week.
The analysis by Richard DeKaser, chief economist of Cleveland-based National City Corp., defined a housing market bubble as one in which prices are at a 20 percent premium.
Reno, DeKaser said, stands at a 19 percent premium.
The economist calculated the premium by looking at the underlying factors that drive housing prices factors such as income levels, interest rates, population density and the historic track of price increases and comparing them to current prices.
The highest premium he found among the nation's 99 largest housing markets came in Chico, Calif.,where prices carry a 43 percent premium.
Las Vegas prices, DeKaser said, carry a 24 percent premium, while prices in Sacramento carry a 25 percent premium.
So will these bubbles deflate? Not necessarily, DeKaser said.
"While overvaluation in home prices presents a risk of future declines, these risks may well go unfulfilled," he said.
The test, he said, will be whether the Reno-area economy can boost income levels to support the higher prices and whether interest rates remain attractive.
The markets where home prices are farthest below the levels DeKaser would expect include Macon, Ga.; Little Rock,Ark.; Beaumont, Texas; and Syracuse, N.Y.
