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Robert Shiller: We're not in a housing bubble... yet

Home values in 20 U.S. cities are still climbing as a tight supply helps push prices higher. The S&P/Case-Shiller 20-City Composite Index rose 5.7% in January year-over-year, on the heels of a 5.6% annual gain in December.

“The price climb has been pretty steady since 2012. In a lot of cities, prices are up over 30%. I think people are cautiously optimistic,” Nobel Prize–winning economist Robert Shiller, co-creator of the S&P/Case Shiller Index, told Yahoo Finance’s Seana Smith in the video above.

Despite the Federal Reserve’s decision in December to increase interest rates for the first time in nearly 10 years, the sustained growth in home prices has shown no signs of easing. Eleven cities saw year-over-year prices climb at a faster rate in January than in December, with Portland, Seattle, and San Francisco posting double-digit annual gains. Portland led the way with an 11.8% year-over-year price increase, followed by Seattle with 10.7% rise and San Francisco with a 10.5% climb.

While skyrocketing prices have sparked some talk that the housing market could be approaching bubble territory, Shiller says there’s still some room for prices to run.

“It’s not bubble territory yet, but bubbles are always a possibility,” said Shiller. “Right now we’re sitting where we were in 2003, and that developed over the next three years into quite a bubble.” In 2006, there were more than 1.2 million foreclosure filings, a rate of one foreclosure filing for every 92 U.S. households nationwide.

Taking a look at the broader picture, Shiller said that he’s concerned about recent volatility and “spectacular drops” in U.S. stocks and overseas markets, warning that further weakness could lead to a loss of confidence and cause investors to develop a “wait-and-see attitude.” He’s also keeping an eye on the recent plunge in oil prices, saying it would be “worrisome if these fears return.”