SAN BERNARDINO, CA—The Inland Empire's economyis transitioning from a recovery to an expansionary cycle, and theregion's residential real estate market is responding, according toresearch and consulting firm Beacon Economics.

Median single-family home prices rose 16.5%, to$267,000, from the second quarter of 2013 to the second quarter of2014. The Los Angeles firm had this to say about the trend in arecently released analysis that referencesRiverside and San BernardinoCounties:

From a long-run perspective, median home prices in theInland Empire have increased by over 71% since hitting bottomduring the third quarter of 2009. Still, prices remain 32.1% belowtheir all-time high of $393,400 reached during the first quarter of2007. Residential real estate prices during that bubble period,however, were unsustainable and home prices should not revert backto those levels without a commensurate jump in local incomes.Unless, of course, another bubble forms.