As home prices surge, some Bay Area investors and house-hunters want to control the spike by getting mortgage lenders to put more of their foreclosed properties back on the market. But the chief economist of San Francisco's Wells Fargo Bank says now is not the time to release inventory.

San Francisco home prices have risen 4.3 percent in the last year. In San Jose, it's 8 percent.

John Silvia, chief economist of Wells Fargo, says these numbers are signs of recovery.  "The last thing you want to do is flood the market with anything, because then you're going to create all this confusion in terms of prices over time."

Silvia thinks now is the time to learn from the bank's biggest mistake during the collapse of the housing market. "Prices can go down. That's a brand new part of the ballgame and that's going to change, I think, the way anybody does business in the mortgage market going forward."

California's home ownership rate stands at 54.4 percent, down from the peak seen during the last bubble. "That's what we want," Silvia says. "something that's sustainable and reasonable. We don't want bubbles all the time. So if you want a 65 percent homeownership rate, we can give that to you, but that's not sustainable over time given people's budget and income and personal habits."

Jed Kolko is chief economist with the online real estate company Trulia. Kolko says Silvia is speaking from self-interest. "Those that own homes, including banks as well as individual homeowners, are actually benefitting from the lower inventory because that's pushing up their values."

Kolko says Bay Area prices and those around the state are controlled by some natural, and some man-made factors. "We've got ocean on one side and mountains on the other, but also because of regulation. California is an unusually difficult place to build new housing. That keeps the supply tight, and prices high."

While California lawmakers try to keep people in their homes through measures like the Homeowner Bill of Rights, Kolko says construction is another way of promoting home ownership.