Although Tucson ranks tenth in the nation for having the highest increases in median home prices, the area is near the bottom of the list when it comes to markets where housing prices are overvalued.

That's considered a good sign for people who are worried the hot housing market is a bubble that may burst, causing home prices to fall.

In the latest report by the National Association of Realtors, Tucson saw a 30 percent increase in the median price of a home over the last 12 months, to $228,500.

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The nation's hottest market was the metropolitan Phoenix area, including Mesa and Scottsdale, where the median price of a home was up 47 percent to $243,400. Tucson ranked tenth of 299 metropolitan areas for gains in the median home price.

But unlike most of the other metropolitan areas on the fastest-growing list, neither Tucson or Phoenix are listed among those threatened by the housing bubble, according to another study, done by National City Corp.

The bank report compares the current median price with historic data on prices, area income, mortgage rates and population density. It listed Tucson at 15 percent and Phoenix at 16 percent above normal. Anything over 30 percent was considered extremely overvalued making the market "a high risk of future price corrections." There were 53 metropolitan areas above 30 percent but Prescott, at the 30 percent threshold, was the only Arizona city on the list.

Many California areas were among the 53 at risk. Number 1 was Santa Barbara at 69 percent.

On that list, Phoenix was 108 and Tucson was 119,

Among the markets that made both lists, Tucson ranked second lowest among the top 10 housing markets for home price inflation. Only Durham, N.C., was lower, with homes priced just 5 percent above National City's projected normal.

"Higher home prices are easier if you were undervalued to begin with," said Kym Adair, membership and marketing director of the Tucson Association of Realtors. She said both Tucson and Phoenix are responding to changes in the overall economy and population of the region. Higher housing prices are a part of that change.

At some point, the prices will level off again, "but I don't think there's some magic number where that will happen," she said.

"When you have low supply and high demand, like we have right now, you'll see dramatic price increases," Adair said. "As long as the economy remains as good as it is right now and interest rates remain low, home prices will continue to rise."

Meanwhile, housing industry analyst John Strobeck, of Bright Future Business Consults, said comparisons of Tucson home prices with other cities still show the city to be a bargain.

"This is still one of the best buys in the nation," he said.

Strobeck notes the increase in the average and median prices for resale homes, at $247,703 and $202,000, matches the 30 percent median price increase for all homes, including new houses, which are up due to escalation in land prices, as well as government fees, which now run about $15,000 to $20,000 per new home.

"So, what has really happened is that resale prices are catching up with new construction," he said. "This data just shows that the stock of homes is not enough for the demand, right now."

While higher prices may dampen demand as prospective new residents are priced out of the market, 30 percent of home sales are to retirees.

"They're coming here because they've planned to come here for years, and they're coming with money to buy a home from the sale of property elsewhere," Strobeck said.

Although Tucson prices are up, they're still lower than the Midwest. The median price of a home in Chicago is $263,600 and in Minneapolis-St. Paul, it's $237,700. Only Milwaukee is slightly lower, with a median price of $216,800.

"They're able to replace what they sold at a lower cost. So, it's still attractive to come here," Strobeck said. "Because of this market, we're not ever going to be out of good housing sales, ever, unless we have some kind of national disaster."

Philip S. Moore may be contacted by e-mail at pmoore@azbiz.com or call (520) 295-4238.