Orange County’s recent history of ever-rising home prices, now amid a modest cooling of the local economy, brings out fears the local real estate market is getting overheated once again.

You know, “bubble” talk.

In some ways, an asset bubble is in the eye of the beholder. There is no formal definition of when any market reaches the bubble stage – but it’s typically when an asset’s value outstrips the underlying economic fundamentals behind ownership.

For local housing, the big question is when do obvious affordability challenges become a huge economic risk to the entire market? And what becomes of home values once the economic mismatch is exposed?

Two recent reports on the regional economy from well-known analysts have very different ideas about the housing market’s sanity.

Jim Doti and the economists at Chapman University think Orange County housing is in bubble territory with a big “but” … they see no signs of any immediate bursting.

Meanwhile, Mark Schniepp from the California Forecast sees no bubble. Yet.

Now, the two gurus do agree on a critical issue: a lack of supply. There’s a razor-thin inventory of homes to buy and those few residences listed for sale still sell swiftly. So these seller-friendly conditions have led Chapman to forecast a 6.4 percent jump in Orange County home selling prices this year.

Here’s my take on how these two analyses differ …

Doti’s main worry: Local home prices have grown faster than the typical local paycheck. Roughly speaking, buyers here pay triple the national cost by various measures. More and more buyers are stretching their budgets to acquire housing while others are simply priced out of homeownership. That imbalance cannot last.

Schniepp’s retort: The strength of the overall economy – currently going through a slow patch – justifies much of the recent upswing in home prices. Low unemployment – at levels suggesting there’s actually a worker shortage in Orange County – coupled with near historically low mortgage rates is a solid combination to rationally explain the rising home prices.

Doti’s dour outlook: The same shortage of workers lowering unemployment — to 17-year lows, I must add — will also put a crimp on the economic growth that promoted the energetic housing recovery. Projected cooling in construction, tied to housing affordability challenges as well as limits on builders to construct more residential projects, could further chill the local economy.

Schniepp’s optimism: Economic strength locally — and across the state — should continue for at least another 18 months. Worker shortages will boost wages, especially for younger adults who haven’t been massively interested in homebuying in this cycle. Youthful pent-up demand for housing will create more house hunters.

Doti’s retort: Barring dramatic change in government action — tax cuts or another stimulus, and regulatory relief — the economic cooling will continue and could possibly morph into recessionary pressures as early as next year. The Orange County housing bubble is real and its bursting is inevitable.

Schniepp’s hope: This isn’t the last housing cycle of a decade ago where an overheated housing market overdosed on speculative real estate purchases and easy mortgage credit. Long-time homeowners, an aging group in or nearing retirement, have little incentive to sell. And there are no easy solutions to Orange County’s long-running housing shortage, so supply constraints will help balance the market.

Who’s right? One translation of these seemingly conflicting views is that we are in the later stages of one of the longest economic expansions in history and many business-logic assumptions should be questioned. Orange County’s high cost of living, a by-product of great local wealth and a strong regional business scene, makes it challenging to attract new employers and workers. When this cycle’s growth ends — and it will — housing will suffer.

How much? The scope of the next housing dip is the really big question! In the late 1980s, Orange County home prices soared past their logical values. That bubble deflated somewhat slowly, limiting buying activities for much of the early 1990s. However, the last bubble of the mid-2000s ended violently. Schniepp thinks housing’s next downturn will be mild. Doti only offers up hope that it won’t be too painful.