A recent report published by Case-Shiller indicates that home prices are growing at least twice the rate of inflation. This creates a gap between growth of business, wages, income and the price of a home, especially in tony West Coast markets. 
In the case of West Coast homes, the double-digit increases for the average home price in May may only be temporary. Overall, average prices nationally, according to Case-Shiller, increased only 6.4% in May.
Still, there is some trepidation and concern stemming from higher-end markets such as Seattle, so much so that it appears that new inventory is coming onto the market that will ultimately stabilize the accelerating trends. Too much inventory is never good for any market.
Even in trendy Southampton, Long Island, the average medium-sized home dipped below one million dollars just recently. This reflects that buyers are becoming more judicious in what they’re willing to pay for a house. It also may be the result of less demand for higher-priced homes due to the income tax deduction limits from the recently passed tax reform.
As reported, Seattle, Las Vegas, and San Francisco increased over 10% in the last year.
Now it appears over the last few years that year-to-year increases of 5% are the new normal.
As new construction continues to help fill-in the inventory gap, and foreclosures and REOs are drying up, we’re starting to see a more normal market, normal in that it has no shadow inventory and with mortgage rates that reflect a recovered economy.
In addition, rent growth has basically stabilized to sustainable levels, which is another healthy sign that we are arriving at some level of equilibrium.