I am about to show you how, when it comes to the real estate bubble in the U.S., there is actually a whole lot more good news than bad. For real.

Would you believe that for more than 80 percent of the states, there is no bubble at all. Read on …

 As real estate professionals, we have talked about it before, but what is the possibility of a U.S. real estate bubble, and the possibility that even without a real estate bubble/crash, we could experience sustained falling home prices nationally.

There is certainly lots of hoopla and hysteria about the deteriorating market, and clearly there is validity to much of it. However, here is a fact to consider when examining when, if ever, a bubble exists.

Turns out, there really is NO national real estate market, since all real estate is local (and even varies within an individual zip code).

Using the Office of Federal Housing Enterprise Oversight (OFHEO) quarterly real estate price indexes for U.S. states through the first quarter of 2008 (data available at the St. Louis Fed), graphs for the housing price index in each of the 50 states was inspected and the following discoveries were found:

• No question. Here is where the bubble surely has burst: For four (4) states — Arizona, California, Florida and Nevada – there has definitely been a real estate bubble with a definite crash in prices in in recent quarters.

• Is this just a correction or a true bubble?: For six (6) other states — Hawaii, Maryland, Massachusetts, Michigan, Rhode Island and Virginia – there is certainly some correction in prices going on, but not enough of a price drop to make it a crash. Check out the chart on the House Price Index for Maryland, and you be the judge … slight correction or bursted bubble?

• And for 80 Percent of the states, there has been NO crash at all: For the other forty (40) states, it seems clear that there hasn’t been a crash at all, and real estate prices have continued to increase in most of those forty states (see bottom chart above), or have leveled out.

Bottom Line: To the extent that there has been a real estate bubble in the U.S., and a subsequent crash in home prices, it’s been pretty isolated to a small group of states like CA, FL, NV and AZ, and most of the country has seen home prices continue to rise, or flatten out. For the specific details, check out the graphs of each state below:

STATE/BUBBLE?

• Arizona YES
• California YES
• Florida YES
• Nevada YES
• Hawaii MAYBE
• Maryland MAYBE
• Massachusetts MAYBE
• Michigan MAYBE
• Rhode Island MAYBE
• Virginia MAYBE
• Alabama NO
• Alaska NO
• Arkansas NO
• Colorado NO
• Connecticut NO
• Delaware NO
• Georgia NO
• Idaho NO
• Illinois NO
• Indiana NO
• Iowa NO
• Kansas NO
• Kentucky NO
• Louisiana NO
• Maine NO
• Minnesota NO
• Mississippi NO
• Missouri NO
• Montana NO
• Nebraska NO
• New Hampshire NO
• New Jersey NO
• New Mexico NO
• New York NO
• North Carolina NO
• North Dakota NO
• Ohio NO
• Oklahoma NO
• Oregon NO
• Pennsylvania NO
• South Carolina NO
• South Dakota NO
• Tennessee NO
• Texas NO
• Utah NO
• Vermont NO
• Washington NO
• West Virginia NO
• Wisconsin NO
• Wyoming NO

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