*I'm not sure how this will get played by the mass media or if it will at all, but what the "chief economist" at the MBA has to say about housing is pretty important material, even if it only affects the psychology of this crazy speculative housing market!...
Housing market crash debated Posted on Sun, Jul. 03, 2005 Los Angeles Times
The chief economist for the Mortgage Bankers Association is worried enough about the torrid housing market to get out of it.
“I’m going to rent for a while,” said Douglas Duncan, who expects “significant reversals” in regions that have enjoyed strong home price appreciation, including the District of Columbia, Florida and California. He plans to sell his suburban Washington home, which has tripled in value since he bought it a dozen years ago, and move into an apartment.
Duncan is among many people across the United States debating the possibility of a housing bubble — a condition where prices have risen so far out of hand that they eventually crash.
Prominent policy-makers and academics, including Federal Reserve Chairman Alan Greenspan, have warned about bubbles in regional markets, though there are fewer worries about housing prices in Kansas City and other communities in this part of the country. A recent nationwide Gallup/Experian poll showed that nearly four in 10 said they expected a bubble to burst in their region in the next three years.
However, none of the experts or novices knows for sure when and how a bubble might burst. Bubbles throughout history, including tech stocks in the late 1990s, often go on for years and crash when few expect it. Many experts and media pundits have been predicting a downturn for the last three years — and home prices have continued to rise. They are up nearly 70 percent since 2001 in the Southern California market.
Consequently, though some homeowners like Duncan are pulling back, others are buying as if prices will continue to rise for quite some time.
A widely followed University of Michigan consumer survey, released in May, showed that 24 percent of respondents nationwide said it was a good time to buy a home because prices would rise. That was the highest percentage since 1988 — right before prices peaked in the previous real estate cycle.
“These are powerful engines creating a boom in home sales, and all booms end the same way,” Richard Curtin, director of the survey, said in a news release.
Three years ago, Phoenix Management Services, a turnaround firm based in Philadelphia, asked about 100 lenders in its regular quarterly survey whether they thought there was a real estate bubble. Fifty-eight percent voted yes, and 29 percent said no.
A few months ago, Phoenix asked the question again. Despite the last three years of zooming prices, 46 percent of the lenders said it was a bubble, and 39 percent thought it wasn’t.
“They’re saying: ‘This isn’t a bubble. This is here to stay,’ ” said Phoenix managing director Michael Jacoby. “That’s really scary.”
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