Rachel Campbell can't decide what she wants to do with her Galt home she bought two years ago for $205,000 -- keep it or sell it.
The three-bedroom home is on a large lot at the end of a cul-de-sac, which she said is the perfect size to train her two Rottweiler show dogs.
A few months ago, she talked to her Lodi real estate agent and friend, Phyllis Rabusin, and since then she said she's been considering selling her home to take advantage of record-breaking home prices. Campbell estimates her home is now worth around $379,000, almost twice as much as when she bought it just a couple of years ago.
"I've been watching the prices go up," she said. "But I don't know if I should wait for it to go up more or sell before it starts slowing down."
It's a concern shared by many homeowners these days. As home prices have skyrocketed in past years, many experts claim to see a "housing bubble" forming in the market. If that bubble were to burst, like the Internet stock bubble that burst at the end of 90s, it could have dire consequences on the local and national economies. Will the bubble burst?
California's median single-family home price is expected to shoot up to $523,150 by the end of the year, topping last year's record of $450,990, according to California Association of Realtors (CAR).
Several Lodi real estate agents said there's nothing to worry about. But no one can predict the future, said Rabusin, a Lodi real estate agent for five years.
"I tell people that I don't see the market falling off," she said. "It's anybody's guess . . . I would like to see it start leveling off without a big dip in prices."
The so-called "housing bubble" is a metaphor used by experts to describe how the market would appear if housing prices reached their absolute peak.
Fears of a bubble burst -- a drastic decrease in the pricing of homes because of inflation -- are keeping some people involved in real estate on the edge of their seats.
"There is no reason that a house should be worth 40 percent more today than it was two years ago," said Christopher Thornberg of the University of California at Los Angeles' economic think tank Anderson Forecast. "This is a bubble. And this housing market is heated far beyond the point of sustainability."
Anderson Forecast analysts acknowledge an existing bubble but do not see it bursting in California. They predict a leveling off home prices will be a "soft landing" in the economy around the end of the year, Thornberg said.
If the bubble does pop, the local and national economy will be greatly affected since real estate has fueled much of the region's and nation's growth, said Randy Snider, real estate agent in Lodi.
"People would be defaulting on loans, we'd see foreclosures go up," he said. "I don't see it happening in Lodi but if it did, it would be very short term."
A faltering economy would have to occur before there is a decline in real estate, said Leslie Appleton-Young, CAR chief economist.
"In order to get the (real estate) bubble to burst, the economy would have to burst first," she said.
If Calfornians started losing their jobs, consequently forcing them to move out of state, a bigger supply than demand for homes would adversely affect real estate, she added.
"The economy would have to be under very severe recession for the bubble to burst," she said.
Snider said there may be a possibility of higher-end homes bursting in places such as the Bay Area, but reassures his clients that their homes in Lodi are nothing to worry about.
Welcome to 'nuttyville'
On a local level, the Lodi home price in May of last year averaged at $280,000. Home prices have climbed the charts this year, with an average of $370,000 said Paul Mertz, president elect of the Lodi Association of Realtors.
As home prices have increased almost $100,000 in a year, Doug Kuehne, who rents a home in Lodi said home shopping is frustrating.
"I've been doing real estate for many years and this is nuttyville," said Kuehne, owner of Kings Carpet in East Lodi. "This is bad, it's too big already, to say the least."
He is currently trying to find a home to buy in Lodi within the $350,000 range but can't find a house that he likes for a price he can afford. He said if homes were worth what they were five years ago, he would have had some luck.
In 2000, the average price of a home in Lodi was about $154,000, but in just a five-year span, prices have more than doubled.
"I think it's insane and nobody has seen it like this before," Kuehne said. "That's the scary part. What if the bubble pops? The house you own may be worth less than what you pay for."
Kuehne said he's been looking for a house a lot longer than he expected. With the rising prices in Lodi, he said he feels he will have to settle for a house he may not absolutely love.
But Larry Underhill, president of Statesman Realty said Lodi's real estate is within the second most affordable region in California, following Southern California's High Desert.
Central Valley has been a popular hub for people moving out of the Bay Area, Underhill said. Homeowners from the Bay are finding homes in Lodi that are larger and more affordable.
"Here, you're not going to live on a postage stamp," said Snider on people moving to Lodi from small units in the Bay Area. "They're searching for a backyard and a driveway."
The many meanings of affordable
Snider, who is also the president of Lodi Association of Realtors said the appreciation of homes will slow down but he would rather have a greater percentage of the population buying affordable homes than a smaller percentage purchasing more expensive homes.
"There's all this talk about affordability, but it's all in the eye of the beholder," he said. "It's still an attraction to live in California and that's why prices remain high."
Paul Mertz, president elect of Lodi Association of Realtors, said the percentage of people who can afford housing in California is getting smaller.
An estimated 16 percent of California households could afford the median price in 2005, according to CAR's affordability index.
The association finds this percentage with the assumption that all buyers make a 20 percent down payment and spend 30 percent of their income toward the home. According to this calculation, 74 percent of California households cannot afford the housing price median.
Manuel Herrera, a real estate agent in Lodi said the market is currently so inflated that unkempt homes are even starting to sell.
"A lot of homes that are borderline from fixer-upper to demolished are going on the market," he said. "People realize they can sell something that is trashed."
And Kuehne said he doesn't want to be in that position.
"The market and price range I'm looking for isn't worth it," he said of his year-long search for a house. "And I'm not being that picky."
Scripps McClatchy News Service contributed to this report.