But the doomsayers, Lereah says, are mistaken in their dire predictions. Their big mistake, he says, is basing their forecasts by comparing housing appreciation with income growth. Instead, he says, they should look at the percentage of mortgage debt as it relates to income.
Lereah says it would take a "perfect storm" to swamp the real estate industry. There would have to be a slumping economy, job losses, a large inventory and a significant increase in interest rates to create that storm. The closest and most recent example of that occurring, he says, is Boston, which lost 15 percent of its labor force in 1990 and '91.
He sees no such storm gathering in the distance. Instead, he sees a slight contraction in the real estate balloon throughout 2006 and a healthy expansion in 2007.And that, he says, is more important than most people realize.
"The only way to build wealth, for 80 percent of Americans, is real estate. If the balloon bursts, then 80 percent of Americans will have trouble with retirement."