October 24, 2006

Fed Economist: Bubble, Schmubble

Filed under: Economy, MSM Biz/Other Bias, MSM Biz/Other Ignorance, Taxes & Government — TBlumer @ 8:07 am

Published Real Estate Journal, an affiliate of the Wall Street Journal and MarketWatch.com:

U.S. Home Prices May Fall, But Drops Will Be Mild
From The Wall Street Journal Online

U.S. housing prices may decline “a little” within the next year, but any such drop is likely to be mild and inconsistent with a bursting housing bubble, according to a paper written by a Federal Reserve economist.

Based on an analysis of housing futures and options and derivatives of housing-related company shares, “market participants expect home prices to decelerate sharply or actually decline a little within the next year,” wrote J. Benson Durham, an economist with the Fed’s monetary affairs division. However, the anticipated drop in prices “is mild compared to some estimates of the purported overvaluation of the housing market,” he added. The paper, dated September, was posted on the Fed’s Web site Thursday.

Rex Nutting of MarketWatch.com — call your office.

3 Comments

  1. The talk of a bubble came from a media which is concentrated on the coasts where housing had the greatest upswing. They assumed what they saw in their neck of the woods was indicative of the rest of the country. Reality is here in fly over country houses did not go up in price at an extreme rate. Additionally, they confused housing with stocks. Sure some people buy houses with the intention of flipping them, but most people live in their house for years. I moved from Virginia to Ohio in 2004 and bought a home am I affected if its perceived value goes down 5 percent this year? Nope.

    Comment by LargeBill — October 24, 2006 @ 9:32 am

  2. Am I being inconsistent by saying I don’t think there is a nationwide real estate bubble? I think there is ample evidence of localized ones. But does anyone believe that a DECLINE in housing values will be ignored by consumers used to steadily rising values?

    I thought I saw an article recently that said over a trillion in ARM mortgages are due for rate changes in the next 18 months. We shall see how that affects the market.

    Comment by Tracy Coyle — October 24, 2006 @ 10:02 am

  3. #2, I didn’t say YOU needed to call your office. :–>

    Your second para is a big question as it affects the economy, but hopefully not (crossing fingers) the RE market.

    I’m not worried about the traditional ARMs as much as the Option ARMs and IOs. It would be interesting to know the size of the components.

    Comment by TBlumer — October 24, 2006 @ 11:46 am

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