This article analyzes the bubble in property values across cities in the United States from 1999 through 2005. We find evidence of momentum in house price growth (relative to growth in rents) away from the underlying fundamentals throughout the 1980–2005 period; however, momentum increased after 1999. We find that the bubble happened mostly after 2003; it was for a relatively short period and was characterized by a series of positive, seemingly random, shocks that were associated with the surge in the subprime market and the decline in short‐term interest rates. Before that price changes were reasonably well explained by the fundamentals, particularly the decline in long‐term interest rates in the early part of the bubble period. We do not find evidence of a tendency for prices relative to rents to revert to a long‐run trend.