By Nick Timiraos

Rising home prices and interest rates made housing less affordable last year than at any time in the last five years, according to data released Tuesday by the National Association of Realtors.

So is it time to sound the siren over a housing bubble? Not really. Nationally, the Realtors’ housing affordability index shows that, excluding the last five years, homes for the U.S. as a whole are still more affordable than at any time since at least 1981.

Two charts help explain what’s going on here. Bubble fears are being fanned by this chart comparing median home prices to household incomes.  Robert Albertson, chief strategist at Sandler O’Neill + Partners LP, produced a report last November titled “Another Housing Bubble” that featured the price-to-income chart prominently.

Before the housing bubble, median prices stood just under three times household incomes. During the housing bubble, they reached nearly four times incomes. After falling during the bust, prices have since rebounded, and they currently stand slightly above their long-run, prebubble average.

“Without a meaningful recovery in jobs and incomes, higher home prices now will, at best, temporarily reduce negative equity in existing mortgages at the expense of new homebuyers,” Mr. Albertson wrote in his report.

Looking at the relationship between mortgage rates, prices, and incomes produces a slightly different picture. Because financing costs have been so low thanks to the Federal Reserve’s stimulus campaign, the monthly mortgage payment as a share of median incomes remains unusually low. On a payment-to-income basis, then, home prices still look undervalued.

John Burns, a homebuilding consultant in Irvine, Calif., called into question the price-to-income chart in December in a report titled, “A picture: more misleading than a thousand words?” To conclude that home prices are overvalued, he wrote, “you would have to conclude that mortgage rates don’t matter.” He pointed to the payment-to-income chart as a better barometer of near-term housing affordability.

Both Messrs. Burns and Albertson share the same underlying concern: that low rates could ultimately boost prices to levels that would be unsustainable once mortgage rates rise above 6%.

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