By Ryan Jackson
Higher home prices being paid in some U.S. cities could lead to troublesome isolated bubbles, according to new research. Strong 
demand for homes in three of the nation’s hardest hit states are pushing up housing prices more quickly than might be sustainable.
Driven by record low mortgage rates, sales are improving at a brisk pace in California, Arizona and Nevada, the monthly Campbell Housing Pulse Tracking survey found.
“Because many of the home purchases in these areas are cash transactions, there appears to be less braking of prices by our current appraisal system than seen in other parts of the country,” said Thomas Popik, research director for Campbell Surveys. “This trend raises the distinct possibility of housing price bubbles emerging in some of these hot housing markets.”
The Campbell survey tracks responses from 2,500 real estate agents monthly. June data shows a strong increase in sales-to-price ratios in non-distressed sales, with a steep decline in the average time it takes to sell property from the time it is first marketed.
Non-distress property data provides some of the best indications of overall housing market conditions since month-to-month policy decisions of banks and mortgage servicers on foreclosures and short sales do not bias the sector.
The average sales price of non-distressed homes rose to $260,900 in June, more than a $3,000 increase for the month, according to the survey. A large number of real estate agents responding to the study indicated that prices would be increasing more rapidly, except that appraisal standards require comparables from distressed properties to be used in appraisals.
Distress sales make up one out of four transactions across the nation, according to the National Association of Realtors. In markets with a high proportion of cash sales, prices are increasing even faster than other regions.