SEATTLE—Technology-powered real estate broker Redfin recently released a ranking of U.S. real estate markets based on vulnerability to a new housing bubble. While the overall housing market is hot and getting hotter, the analysis concludes that it is not currently in a bubble. This conclusion is based on trends from the peak in 2005 and 2006, compared to those in spring 2013.

"Nationwide, we're not in a bubble," said Redfin CEO Glenn Kelman. "Too many sales have been all-cash for people to get in over their heads, and sales volume is still nearly 40% below the 2005 peak. But markets like Washington DC and Los Angeles, where prices have increased more than 25% faster than incomes since 2000, could be vulnerable as interest rates increase over the next year. Just in the past few weeks, we've seen buyers using more aggressive loans, appraisals getting looser, and almost every sale turn into a bidding war. Even as the investors who were so active in 2012 start to pull back, others willing to pay more seem to be taking their place."

Rising home prices and very high demand are making the market feel "bubbly," especially in Washington DC, Los Angeles, San Diego, and San Francisco. However, in most cities across the country, the important factors that create a true bubble are missing. For example, home prices are rising, but not faster than incomes. Homes for sale are at record lows, and sales volume is average. Nearly half of all homes are paid for in cash. In contrast, during the bubble of 2005-2006, there was an abundance of listings, and record numbers of sales. More than a quarter of homes were bought with no down-payment.