Home prices rose again last year, and the housing market is starting off 2017 at a brisk clip.

According to S&P CoreLogic Case-Shiller data, which includes the 20 largest U.S. cities, home prices regained their 2007 peak late last year and increased 5.6 percent from November 2015 to November 2016 – the latest figure available. Zillow’s Home Value Index, which measures median home value nationwide, predicts its index will reach the 2007 level this spring. Zillow found that home values rose 6.8 percent last year and predicts a 3.5 percent uptick this year.

But could these impressive numbers actually be the precursor to a housing bubble?

“I think we can take the bubble off the table,” says Nela Richardson, chief economist for the real estate brokerage Redfin, which reported a 7 percent increase in sales prices from January 2016 to January 2017. “Demand is really strong. Inventory is still quite low. The market is really fast. None of that suggests a market that’s about to bubble over.”

[See: The 25 Most Desirable Places to Live in the U.S. in 2017.]

The continuing rise in home prices is led by basic economic forces: Demand exceeds supply in most cities, especially for entry-level housing. Plus, unemployment is low and wages have begun to increase, both strong economic fundamentals.

“We are absolutely not in a bubble,” says Ralph McLaughlin, chief economist for the real estate portal Trulia. “The economic definition of a bubble is when people are driving up prices only because they expect prices to increase.”

While economists don’t foresee a crash like the one we experienced in 2008, they do expect the increase of home values to slow, and values could even decline slightly in some areas.

“We are due for another recession,” McLaughlin says. “When that recession hits, prices are likely to flatten or decline.”

The biggest problem for the housing market in most cities is the lack of available homes to buy, especially in the lower price ranges that attract first-time homebuyers. The National Association of Realtors found that the number of homes for sale at the end of January was 7.1 percent lower than the number for sale a year ago, with only 3.6 months of inventory available. Six months of inventory is considered a balanced market.

“We’re seeing very strong demand in many housing markets and not a lot of supply,” says Svenja Gudell, chief economist for Zillow. “Inventory remains a big issue.”

The lack of inventory has made it difficult for those who actually want to secure a home.

“At least in the coastal markets, it’s a very competitive market right now,” Gudell says. “They might put in five different offers and won’t get a home from any of those offers.”

Lack of inventory is also discouraging move-up buyers who might otherwise trade in their starter homes for something larger. But people who bought homes a decade ago may still be underwater or not have much equity to put toward a bigger house.

“It makes it more difficult for a household to trade up to the next level,” McLaughlin says. “You might just stay put and renovate your existing home.”

[Read: Is the Seller's Housing Market Finally Over?]

Another factor reducing inventory is institutional investors who bought up quantities of homes during the foreclosure crisis are holding on to them because high rents make them a good investment. But as home values overtake rents, some of those homes may come to market, McLaughlin says. Rents outpaced home prices in 2014 and 2015, but they are now starting to moderate. “If that keeps pace, we should start to see investors sell their houses,” he says.

Housing inventory is also low because new construction continues to lag, particularly construction of starter homes. That’s partly because of the high cost of land, but it's also because of a lack of construction workers. Little development activity during the recession caused many construction workers to leave the industry or change their specialization. Anti-immigrant measures could make the labor supply even tighter.

Mortgage rates are expected to rise this year, although rates are likely to fluctuate and likely won’t significantly affect demand. “We really don’t think interest rates are much cause of concern for homebuyers,” McLaughlin says. “It may dampen the rate of appreciation, but we don’t think so.”

In cities with the highest pricesSan Francisco, Miami, Boston, New York and San Jose, California – the rate of appreciation on home values has already started to slow, and other cities may follow. “In most parts of the country, housing is still very affordable,” McLaughlin says. “In those markets, we don’t think affordability is going to dampen price increases at all.”

What does this mean if you’re thinking of buying or selling? In general, your personal financial situation is still the most important factor. If you have a stable job, expect to live in the same area for at least five years and have money for a down payment, this is probably a good time to buy. If not, you shouldn’t let rising prices force you into a hasty decision. “I never think rushing to get a home is a good idea,” Gudell says.

[Read: Is Buying a Home Through a Short Sale Ever a Good Idea?]

For sellers, your chance of timing your sale at the exact peak is slim, and when that will be depends on where you live. But if you have reasons to sell your house beyond the strength or weakness of the housing market, now is not a bad time.

“If you’re ready, it’s probably a good time to sell,” Gudell says. “You’re not gaining that much by holding on to the house.”

Tags: real estate, money, housing, housing market, home prices, economy

Teresa Mears writes about personal finance, real estate and retirement for U.S. News and other publications. She was previously the real estate blogger for MSN Money and worked as the Home & Design editor for The Miami Herald. During her journalism career, she worked on coverage of immigration, religion, national and international news and local news, serving on the staffs of The Miami Herald, The Los Angeles Times and the St. Petersburg Times. She has also been a contributor for The New York Times and The Boston Globe, among other publications. She publishes Living on the Cheap and Miami on the Cheap. Follow her on Twitter @TeresaMears.

Recommended Articles

The Best Places to Live for the Weather

Devon Thorsby | April 24, 2019

Where would you move to enjoy blue skies and sunshine year-round?

What to Consider Before Signing a Lease

Geoff Williams | April 23, 2019

Before you commit to signing a lease, consider these expert-backed tips.

Best Places to Live for Quality of Life

Devon Thorsby | April 19, 2019

These metro areas offer the best education, access to health services and crime rates.

Why Spring Is the Perfect Time to Sell

Devon Thorsby | April 17, 2019

Spring is here and interest rates are low – it's a great time to make the most of eager buyers.

Home Selling: Real Estate Team vs. Agent

Dima Williams | April 17, 2019

Solo agents are an industry standard, but teams offer a novel alternative. Here's what sets the two arrangements apart.  

The Priciest Repairs for Homebuyers

Lisa Larson | April 16, 2019

Avoid the repairs that will cost you the most before you move in with a sharp eye and the right inspections.

The Best Places to Live in New York

Devon Thorsby | April 12, 2019

Find out where in the Empire State you'll find the best opportunities.

What’s Dragging Down Your Home's Value?

Devon Thorsby | April 10, 2019

Find out why your home isn't worth as much as you think.

Do Home Value Estimate Tools Work?

Teresa Mears, Devon Thorsby | April 10, 2019

Homeowners now have more control over how home value estimates are calculated.

DIY Projects That Add Value to Your Home

Mady Dahlstrom | April 10, 2019

These are the home improvement projects that will add value to your home when selling.

Are These New Hot Spots Too Expensive?

Devon Thorsby | April 9, 2019

In places where net migration is highest, housing costs are rising fast.

The Best Affordable Places to Live 2019

Devon Thorsby | April 9, 2019

When it comes to housing costs, these metro areas allow your paycheck to go further.

The 25 Best Places to Live in the U.S.

Devon Thorsby | April 9, 2019

These metro areas offer the best combination of jobs, desirability, cost of living, quality of life and more.

Why a Real Estate Agent's Advice Works

Steven Gottlieb | April 8, 2019

The advice your real estate agent offers can help you close the right deal to buy or sell your home.

Selling Your House in a Buyer's Market

Wendy Arriz | April 2, 2019

Five steps to ensure the right buyer sees your home.

Climate Change May Impact Home Values

Geoff Williams | March 29, 2019

With sea level rise accelerating, waterfront real estate values could be revalued sooner than you think.

How to Make Your Open House Memorable

Sally Forster Jones | March 28, 2019

How to prepare your home for a day of showings that will make buyers want to put in an offer.

What Is a BPO in Real Estate?

Devon Thorsby | March 20, 2019

Here's what to know about a broker price opinion, how it's calculated and if you should get one.

Are You Ready To Buy a Home?

Wendy Arriz | March 19, 2019

For the millennial generation, homeownership can still be intimidating. Here's what you should consider before making an offer.

Decorate Your Apartment on the Cheap

Devon Thorsby | March 15, 2019

A short lease doesn't mean you can't make your apartment feel like home.