There are some growing concerns the housing recovery is growing a bubble of unsustainable home price increases.

It isn't - for the most part.

Skyrocketing home price increases from the early- to mid-2000s began with sustainable economic conditions undercut by reckless mortgage lending and investing, consumer greed and a poor regulatory environment, among other conditions.

It was a national economic disaster from which the nation still hasn't recovered.

Today's recovery, with home prices still 30 percent or more below peak values, is a different housing market fueled by economic fundamentals, however weak, consumer caution, greater regulatory controls and other factors that support a sustained recovery, according to a new report from Capital Economics (CE).

Most boots-on-the-ground real estate agents agree.

"The past "bubbles" were caused by dramatic changes external to the real estate marketplace, not the shifts within the real estate market," said Richard Calhoun, broker/owner of Creekside Realty in San Jose, CA.

"It wasn't simple changes in supply and demand or interest rates. Instead the causes were a contracting economy coupled by the elimination of easy money. The elimination of the easy loans explains why the low end of the market was hit the hardest during the last "bubble," Calhoun added.

However, there are a few spot markets where rising home prices may not be as sustainable as are home price increases nationwide.

A recent Fitch Ratings report also says home prices are over valued by about 10 percent.

CE reports, based on Federal Housing Finance Agency (FHFA) data, that average home prices increased by 4 percent during 2012.

To search for sustainability in home price increases, the economic analysis company looked closer at areas where home price gains were just about double or more than the national average.

Eight regions revealed average home price increases of more that 7 percent - Arizona, California, Florida, Idaho, Nevada, North Dakota, Utah and Washington, D.C.

In many cases, these areas' home price gains exceeded previous annual above-average home price increase gains.

North Dakota booming; Washington, D.C. boom questionable

In Washington, D.C. and North Dakota, for example, home prices rose by 23 percent and 18 percent respectively.

Even with budget cuts, Washington, D.C. has the boost of federal government jobs that appear to grow even when the federal budget is supposed to be shrinking. North Dakota's booming oil fracking industry attracted many refugee workers from the home building industry. Ironically, the area can't get enough new homes.

Both areas have seen dramatic employment and income growth through 2012 - fundamentals that support home price increases. Washington D.C.'s employment grew by 11.1 percent as incomes rose 18.9 percent. In North Dakota jobs grew by 6.5 percent and, thanks to all that fracked black gold, salaries soared 36.1 percent.

CE cautions, however, that D.C. home values appear to be 30 percent overvalued relative to incomes. That could mean a price slump, especially if federal spending cuts remove jobs in from nation's bureaucracy.

Sound fundamentals in four states

Along with North Dakota, CE says recovery in California, Florida and Idaho and Utah "looks to be sustainable."

California's concentric Silicon Valley technology industry is creating higher-paying jobs throughout the state and, in investor-popular Florida, jobs grew by 6.6 percent while incomes rose 15.5 percent.

"Contrary to what some in the industry are saying, the market is not experiencing a bubble. A bubble is 'anything artificially inflated in value and size.' Prices are up, but not by leaps and bounds. Prices are still much closer to the bottom than when they peaked in 2006," said Carolyn Miller, president of the Silicon Valley Association of Realtors and an agent with RE/MAX Real Estate Services in Cupertino, CA

Idaho and Utah, less hard-hit states, also reveal strong fundamentals both with employment growth at more than 4 percent and personal incomes growing by 13 percent or more.

Arizona and Nevada least sustainable

Personal incomes are growing in Arizona (12.5 percent) and Nevada (9 percent), but employment growth remains depressed at only 1.5 percent in Arizona and 1.7 percent in Nevada, for the year.

CE also says home building construction in both areas is struggling, coming in at only a third of normal levels. Some of that is due to a reduced labor pool, higher construction costs and a lack of builder confidence.

"The reluctance of homebuilders to break new ground in these states is a legacy of the overhang of existing homes, which we think will persist for some time to come. We're less confident that a healthy housing recovery is underway in these states," CE reports.

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