The number of home resales were up 73% in November over the previous year. Of course last year was during our temporary dip as home buyers were shocked by the disaster in the US housing market and the coming of our own recession.

It’s not just the amount of home sales that’s increasing, the average price has also gone up. The average price has increased 19% over last year and is now $337,231.

All this is happening amid a recession that seems to affect every other facet of our economy. This is why I tend to believe that we’re in a real estate bubble, brought on mainly by low interest rates giving buyers a false sense of affordability.

Now if interest rates are temporarily holding up the real estate market, there are two possible points of time in the future when prices will correct back down. One would be when interest rates go back up, possibly this summer. This would lead to a reduction in demand and therefore a lowering of prices. The other possibility is that if the majority of low rates are fixed for 5 years, then it may take until 2014 for the increased rates to cause homeowners to no longer be able to afford their mortgage and they will either need to sell or they will eventually default on their mortgage. These are also a couple of the points from William’s post detailing five factors that might burst the housing bubble.

While the increase in prices make most think a full recovery is underway, it’s worth being cautious of the possibility of a double dip and to ensure for affordability not just now, but in the future as well.

• Weaky #21: The Mortgage Bankers Association's Underwater Mortgage
• The Continued Slow Deflation of the Housing Bubble
• How to Get Out of Trouble in the Real Estate Market

Related Posts:

• Canadian Home Resales Set Record For July
• 5 Factors That Might Burst The Housing Bubble
• Keep Line Of Credit Or Switch To Fixed Rate Mortgage?