(FORTUNE) – Fundamental economics tells us that home price growth and income growth are interwoven. Neither can outrun the other for very long. That is what’s concerning about the pandemic’s housing boom: Over the past year, home price growth (20.6%) is four times greater than income growth (4.8%).
That disconnect has more economists flirting with the most hated two words in real estate: housing bubble.
Moody’s Analytics chief economist Mark Zandi tells Fortune it’s premature to use that term. A bubble, in his mind, would require both speculation-driven price growth and overvaluation. That said, we do meet at least one element of a bubble: overvaluation. Historically speaking, Zandi says, U.S. home prices are now priced ahead of what underlying economic data (i.e. incomes) would support.
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