The latest quarterly housing market figures are out, and they're adding fuel to the rhetorical fire that's raging over the subject of housing prices in Seattle. As of the end of May 2006, the median home sale price in the Seattle area had jumped to $427,950, up 15.5% from a year previous. The median condominium sale price jumped proportionately higher, 17.9% to $246,500. At the same time, median incomes in the Seattle area have been increasing at a much slower rate. This poses a significant affordability problem for the Seattle housing market, particularly as interest rates have been rising.

As a result, a lot of people are talking about housing bubbles. The question of whether or not Seattle is going through one is hotly contested, opponents typically picking sides depending on their own economic interests. Have you been priced out of the market? Must be a bubble. Have you been making a lot of money selling property or just put a bunch of money into buying a house and have a vested interest in the continued health of the real estate market? No bubble at all.

But one question hasn't been investigated with much depth outside corporate boardrooms. Just exactly why are prices doing what they're doing? Real estate is a frighteningly complex market. Is the answer really just as simple as "strong market" or "speculative mania?"

There's no question that some geographic areas of the United States have been experiencing real estate price appreciation and market enthusiasm that is very bubble-like. Miami, Las Vegas, Phoenix, and some areas of California have all experienced a surge in prices and speculative activity that beggars belief. At the same time, areas such as Houston have experienced rapid growth without real estate market froth, maintaining affordability.

Seattle seems to lie somewhere in between, confusing those of us who live and invest here. Certainly, 15 percent annual price appreciation is not historically typical. What's going on?

In the next series of posts on the subject, I'll investigate Seattle housing prices and associated economic conditions. Some of the answers I'll discuss may surprise you, no matter which side you're on. It turns out that Seattle real estate prices are unsustainably high in many cases, maybe even ripe for a serious correction, but outside of the condo-flipper market there is no bubble...yet. The situation presents a very real problem for our city, and we need to start thinking about remedies.

Here's the list of what you can expect to see in this series over the next two weeks:

1. What Exactly Is a "Bubble," Anyway?
2. Why Real Estate is Not Like the Stock Market
3. Where Conventional Wisdom is Exactly Wrong: What's Not Driving Prices Up.
1. Land Isn't All That Scarce
2. Population Growth Hasn't Kept Pace with Prices
3. Musical Chairs: Construction of New Premium Housing Increases Affordability Rather than Reducing It
4. The Collapse of the Wage Market
4. Six Feet High and Rising: Four Factors that Drive Prices Up
1. Swooping Buzzards: The Fickle Flight of Capital
2. The Dragon Rears It's Head: Inflation Abounds
3. Micro-tyranny in Action: The Huge Hidden Costs of Regulation
4. The Cost of Money Compounds the Problem
5. Bubble, Bubble, Toil and Trouble: What's the Deal With Seattle Real Estate?
6. The Seattle Real Estate Outlook: A Mixed Bag, but the World Is Not About to End.