6 places with emerging housing bubbles

By Christine DiGangi/Credit.com

A new report on the housing market indicates there's little risk of the country experiencing another housing bubble, even as prices rise above the peaks in the 2005 to 2008 bubble leading up to the mortgage crisis. RealtyTrac, a housing-data analytics company, released Thursday an analysis of real-estate markets in 475 counties and identified only six that are in "bubble territory."

There may be little threat of a national bubble, but affordability remains a struggle for aspiring homeowners, as property values increase and median wages fail to keep pace. To determine home affordability, RealtyTrac compared median household incomes and median home prices at different points in the last several years.

The affordability percentage is measured by how much of that area's median income would be required to afford monthly mortgage payments on a median-priced home, given an 10 percent down payment, a 30-year fixed-rate mortgage, private mortgage insurance and median property tax. For example, in one of the least affordable markets in the U.S., Kings County, N.Y. (aka Brooklyn), a monthly mortgage payment on a median-priced home would cost 98 percent of the median monthly income in that area (hence the "unaffordable" label).

Plenty of places in the country are ridiculously unaffordable for residents making the median income, but that alone isn't indicative of a bubble. RealtyTrac also looked at foreclosure rates between mortgages originated in 2013 and those opened in 2014, because an increase in foreclosures is a bubble warning sign. The report lists 178 counties (37 percent) with rising foreclosure rates.

As far as bubbles go, only six counties are at risk for price overinflation and subsequent decline. These counties are now less affordable than they were during the bubble years:

6. Allegan, Mich.

Median Home Price, October 2014: $175,000

October 2014 Affordability Percentage: 26%

Peak Bubble Affordability Percentage: 25.29%

5. Travis County, Texas

Median Home Price: $374,900

October 2014 Affordability Percentage: 48.14%

Peak Bubble Affordability Percentage: 47.12%

4. Suffolk County, Mass.

Median Home Price: $423,000

October 2014 Affordability Percentage: 60.7%

Peak Bubble Affordability Percentage: 56.93%

3. Montgomery County, Tenn.

Median Home Price: $139,900

October 2014 Affordability Percentage: 21.52%

Peak Bubble Affordability Percentage: 17.1%

2. Brazos County, Texas

Median Home Price: $184,900

October 2014 Affordability Percentage: 33.89%

Peak Bubble Affordability Percentage: 28.84%

1. Jefferson County, Ala.

Median Home Price: $252,414

October 2014 Affordability Percentage: 42.29%

Peak Bubble Affordability Percentage: 29.7%

Change in affordability

Meanwhile, 49 percent of counties are historically affordable (meaning the current affordability percentage is below the average dating back to January 2000) or have flat or falling foreclosure rates. A tight lending market, combined with fresh memories of mortgage mistakes, seems to have minimized risks of entering another housing bubble. Still, finding an affordable home is a challenge in many parts of the country, even as mortgage rates have hovered at historical lows. If you're trying to get the most bang for your borrowing buck, you need to have great credit and all of your paperwork in order to be able to afford the mortgage you need. You can get your credit scores for free every month on Credit.com to see where you stand.