You can hardly pick up a paper, a business magazine, or turn on the television without hearing that the bubble is going to burst in real estate values. Some would say who could blame them? Home values have risen considerably over the past four years.

In 2002, the national median sales price for a single family home was $156,200. Recently released figures for October 2005 indicate that the median home price has risen to $218,000. (The median is the price at which an equal number of homes sold for prices that were above and below that number.) This represents an appreciative return of nearly 40%. In comparison, the return on the S&P 500 since January 2003 has been 44%. Interestingly, you don't hear anything close to the same level of bubble talk surrounding the stock market!

To be fair to pundits, different parts of the country have experienced gains that are far in excess of the national average. Some regions have experienced gains of nearly 100% or more over the same period of time. Typically, the largest gains have been registered on both coasts as well as in the northeast. However, even in these parts, a rapid rise in housing prices doesn't necessarily point to a bubble in values.

There are several factors to take into consideration when evaluating the price of a commodity. The first is supply and demand. Ultimately, the buying public will determine what a fair and reasonable price is for any product or service. The greater the demand for housing, the greater the value that is placed on it; and the greater the appreciation for homes in a particular area.

Take Florida, for example. The sunshine state has seen an exceptionally high level of appreciation, 68% since January of 2003. Let's examine some of the factors that have contributed to this amazing growth.

Currently, Florida has one of the lowest levels of unemployment, 3.4%, of any state in the country. Florida is also leading the nation when it comes to the number of jobs created, having added over 250,000 jobs in the last twelve months alone. To top things off, Florida has the fastest annual job growth of any of the 10 most populous states. It's easy to see that Florida's home prices are rising because people are moving to the state for new jobs and nearly everyone is employed.

As if that weren't enough, Florida remains one of the largest retirement destinations in the country, which also helps to keep the demand for housing high. Factors similar to these exist in other parts of the country where home prices have risen significantly.

Let's return to the stock market analogy for a moment. When someone buys a home, they typically intend to live in it or use it as a vacation or seasonal home. The commitment to owning that home is considerably different than the motivation behind buying a stock as an investment.

If someone buys General Motors at $30 a share and the stock falls 15%, the ability to sell the stock is instantly available if desired. If someone pays $300,000 for a home and the value falls 15%, are they going to sell just because the value is down? Probably not. Homes are typically purchased for reasons that extend well beyond their immediate value or investment potential. There are extenuating circumstances involved, such as schools, location, jobs, amenities, etc.

The National Association of Realtors (NAR) recently published information detailing the strength of housing markets in 130 areas across the country. (www.realtor.org/research.nsf/pages/anti-bubblereports) In these reports, the NAR examines the many factors that contribute to the present values of homes. The reports look at affordability, price activity, and local fundamentals such as job growth, housing starts, net migration, as well as the risk factor to a bubble.

The statistics are pretty revealing. While some cities may be more prone to a deceleration of appreciation, others, even at their present level of appreciation, don't show any signs of distress.

Las Vegas is frequently cited as having housing prices that are out of control. However, statistics illustrate why the increases Vegas has experienced are warranted. While appreciation for the last three years has registered at 88%, job growth has been nearly 400% greater than the national average. Even though housing prices have risen significantly, the average debt service of a mortgage to income remains at a reasonable level of 25%. Compare this to the same statistic for the Top 20 Metro areas, which is 30%.

There's no denying that the housing bubble makes for interesting conversations at parties and the office water cooler. However, as things stand today, there are more reasons pointing to there not being a housing bubble as compared to those that do. If you know someone who's on the fence about whether to purchase real estate at this time, you should probably tell them to get busy and find a home. Prices for the last twelve months were up over 16%.