Random Housing Bubble Questions

"There has been a raging controversy among experts over the question of is there a housing bubble. Is there a housing bubble?"

"Yes, there most definitely exists a housing bubble in many of them major metropolitan areas as well as selected non metropolitan areas. In my book, a housing bubble market is a housing market which will decline at least 20% or greater ( inflation adjusted dollars) during the course of 4 years."

"Can you please name some areas that are experiencing a housing bubble?"

"Sure. Modesto, San Francisco, Sacramento, Las Vegas, Phoenix, Boston, Seattle, Naples, Jacksonville, Miami, Hartford, Providence, Flagstaff and Philadelphia. Of course there are many other places."

"Given the increased talk of a housing bubble and Greespan's remarks, why has the housing bubble not burst yet?"

"Good question. First I would like to say that many bubble markets have already entered a period of stagnation ( stagnating home prices, building inventory). Secondly, the housing market is a slow moving vehicle, it cannot turn on a dime. But turn it will. This fall, many bubble markets will be seeing price declines. Once, the greedy investors fully realize that the boom is over the bust will come. Fear is a strong factor then greed. The housing bubble is a speculative episode and just like other speculative episodes it will end with a bust not a whimper."

"What do you think the Fed will do with short term interest rates?"

"By the end of the year short term interest rates will likely be at 4.00%. The fed is unlikely to continue and increase them higher then that because of the perilous nature of the economy."