WP: Bernanke: There's No Housing Bubble to Go Bust

[DeepModem Mom]

Bernanke: There's No Housing Bubble to Go Bust
Fed Nominee Has Said 'Cooling' Won't Hurt
By Nell Henderson
Washington Post Staff Writer
Thursday, October 27, 2005; Page D01


Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

Bernanke's thinking on the housing market did not attract much attention before Bush tapped him for the Fed job Monday but will likely be among the key topics explored by members of the Senate Banking Committee during upcoming hearings on his nomination.

Many economists argue that house prices have risen too far too fast in many markets, forming a bubble that could rapidly collapse and trigger an economic downturn, as overinflated stock prices did at the turn of the century. Some analysts have warned that even a flattening of house prices might cause a slump -- posing the first serious challenge to whoever succeeds Fed Chairman Alan Greenspan after he steps down Jan. 31.

Bernanke's testimony suggests that he does not share such concerns, and that he believes the economy could weather a housing slowdown....


http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html

[oioioi]

1. He's right. It's just the new American class divide thanx to ShrubCo

[Fovea]

2. Great, now we have Lysenko as

head of the Fed.

[niallmac]

8. If dead people could be person of the year then maybe it's time

'Time' exhumed Lysenko. This new American majority has little time it seems for facts, research and dreary details.

[htuttle]

24. Yes, I'm sure he thinks the whole notion of a housing bubble...

...is 'Democratic Economics', and therefore false.

With him in charge, I'm expecting our wheat production (and the chocolate rations) to go sky high now, exceeding all (revised) projections...

[madrchsod]

3. another delusional economic guru

he should read economic 101 again

[cliss]

4. You're right. If this is Bernanke's position,

he gets a F- before he even starts his job. There is in fact a housing bubble. And it's not so much caused by speculation, as it is by GNMA and FNMA (Ginny Mae and Fannie Mae). These 2 housing giants are corrupt. Their CEO has been UNDERSTATING revenues...a very strange situation.

The SEC got wind of it, and they've been investigating for about 1 year. They're afraid to blow the lid off of it, because they are terrified it's going to start a housing bust. The whole damn house of cards could collapse.

And if Bernanke doesn't know this, he's stupid.

[Julius Civitatus]

7. The Ostrich Strategy: a staple of the Bush administration

Trouble? Problems? Just ignore them! They'll go away.

:eyes:

[leesa]

17. They WANT the middle classes not to own houses. They are

building a feudal society.

[Orsino]

25. They just want the rich to get richer.

I don't believe they care about the middle or lower class.

[Delphinus]

26. Agree with you, Orsino.

They don't care about anybody that's not rich or richer. But, when we, the lower and middle classes disappear, who are they going to call upon to scrub their toilets or nanny their children? They better be careful in getting rid of us.

[Orsino]

27. Hmm. I guess they do care...

They care enough to work hard to ensure that every one of us is harnessed to a rich man's plow.

[highplainsdem]

21. Delusional. That was the word I was going to use for him as soon

as I saw the headline.

I wonder how he explains home builders selling their stock in their own companies, then, as has been reported. They seem to believe the bubble's about to burst.

[SammyWinstonJack]

5. No wonder Pinhead** nominated him.

:shrug:

[Julius Civitatus]

6. No housing bubble here... Houses cost $2 million cause people can pay that

See how this elitist Republican mentality works?

There's nothing wrong with $1 million for starting houses! Somebody must be paying that price, even if real estate is just concentrating in the few hands that can afford these horrible prices.

Bubble? What bubble?

It's all supply and demand, bitches! Forget the predictions of thousands of economists worldwide. This guru of trickle-down bullshit says prices are right.

A true believer as chairman of the Fed. reserve. Very scary!

:wtf:

[Porcupine]

9. The truth is that people cannot pay current market prices....

Disclaimer: I work in property management.

The housing market has been massively subsidized on all levels for years now. Any tightening of the national budget at all and the whole house of cards collapses.

The prime card is low interest rates and low or zero down payment loans. We are recently seeing no principal payment loans and even no principal/deffered interest loans. This is casino gambling using houses as chips.

Supporting this card is the real estate investment market. Due to the horrible showing of the stock market investers are buying rental houses at a furious rate. Many of these investers (my clients) have not factored realistic vacancy and maintenance costs into their cash flow equations. In short they are gambling on a rapid increase in the equity of their properties to cover their investment costs. This is pure speculation.

Tenants, the foundation of this whole mess, are going broke. Tenants are simply refusing to pay their full rents in larger and larger numbers each month. They don't have the money due to increased prices on gas, utilities and food. Nobodies giving these tenants much in the way of raises either.

Around March 1st. a huge number of tenants in the U.S. will have failed to make their full rent payments for several months due to heating costs. At that point a huge number of landlords will give up and put their houses on the market. At that point the gig is up.

Good luck all.

[sendero]

19. Good points...

... and might I add that the trend towards low to zero down payment is not helping.

When you relax the standards for loans to the point where anyone can get one - lots of folks who are not prepared for the expense and responsibility of home ownership buy in.

The first hiccup in their income or expenses leads them to foreclosure, which is a drag on prices, which can lead to a vicious circle.

As far as I can tell, the blatant over-relaxation of lending standards is the FNMA equivalent of the Treasury's mighty printing press going into overdrive. At all levels, the Federal govt is taking drastic measures to spur consumption and keep this half-dead economy alive.

[kostya]

34. Thanks for some real-life observations! n/t

[truthisfreedom]

10. there's already regional things happening... there's been news about CA

prices tumbling already. i'd like to believe he's right, and that there's no major bubble, but God forbid that there is one!

[fleabert]

11. the man is a lunatic.

no money down, 30 yr + 10/15 yr double mortgage in a house built for a third or fourth the sale price is a housing bubble.

[Nay]

14. A lunatic, indeed. And don't forget, many people who own

houses have taken out huge equity loans on them. It's all going to be a real train wreck.

[moondust]

12. Gold is looking better.

What is that far off rumbling sound?

[mcscajun]

13. There is no bubble...there IS no Spoon, Neo

If only wishing could make it so.

Damnittohell, we've got another faith-based blind man in charge of something important.

MOMMMYYYYYYYYYYYYYYYYYYYYYYY!!!!!!!!!!!!!

[w8liftinglady]

15. At least 1400 homes foreclosed in Dallas County this month

Maybe that's insignificant to them.I am seeing more and more 300K and up homes foreclosed.

[salin]

16. growth in incomes?

Your words are the only indicator of this - all the reports seem to indicate an alarming trend of incomes shrinking overall when compared to increasing costs (that is.. the dreaded... INFLATION word.)

[hatrack]

22. Exactly! My first reaction?

:wtf:

Does he even read the BLS and BEA press releases? Doesn't look like it.

[oioioi]

23. There will be no housing crash; inflation will see to that.

[Maeve]

18. The devil's in the details--national vs "in many markets"

Not every area in the country has had the same amount of puffery in prices. Some local markets are going to pop loudly, others will deflate slowly; some may hold fairly steady for a longer time than expected. He's hedging his bets by saying it won't be a universal disaster, just a regional one (and as long as it doesn't hit his friends....)

[Zynx]

20. That's all I needed to hear about him.

He's well educated and has raw intelligence, but he doesn't use it because he is actually an ideologue disguised cleverly by his academic background.

[WCGreen]

28. The thing is this bubble will brust

and just like the Dot.Com bubble, it will ripple beyond the hot spots like Fla, Tx and Cal....

The returns on the stock market have been so flat for the past five years or so that people are looking for those ten fifteen twenty percent yearly returns that they all headed of toward housing speculation....

Why do you really think oil and Gold are rising fast....

Not becuase of shortages but because of the potential of the big gain...

Bubbles are bubbles...

They eventual pop....

[Bonhomme Richard]

29. I've seen lots of "New Prices" in our local real estate.......

section. That's western CT.
It screams buble bursting to me. And by the way, who would put any faith in what a shrub appointee has to say?

[BiggJawn]

30. WHAT "strong growth in jobs, incomes and the number of new households."?

Pay no attention to that man behind the curtain, eh?

S'Yeah, R-i-i-i-i-i-i-ght.....

[Julius Civitatus]

31. Exactly! What growth in jobs and incomes? Not around me!

Don't see many people around me doing much better than they did 5 years ago. Most people I know (who are college post-graduates) are seriously underemployed, making shit money, but holding on because that's all they can get. The job market under Bush is crap, mainly low paying "mac jobs" that lead nowhere. But the new fed chairman claims there's no housing bubble because of "huge growth in jobs and incomes." In which planet???

All economic indicators point to the fact that incomes have seriously decrease under Bush ,and buying power is lower than a few years ago.

I think we have a serious ideologue here, unable to see beyond his own utopias. Brace yourselves, folks. It's going to get rough!

[BiggJawn]

32. Why is it these guys that nominated for FED...

Seem to be real Fountainhead-quoting Randish "Objectivists"?

[MadHound]

33. Jesus H. Christ on a pogo stick

Really now, would it be that tough to nominate one, just one, apointee who lives in the reality based world! Just once, please.

Batten down the hatches and buckle in folks, if this delusional idiot gets the nod, this country is going straight to economic hell.

No housing bubble:banghead:

[adigal]

35. This guy is an idiot, it's official.

"But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households."

OK, this guy if officially an idiot - what strong growth in jobs, incomes, and new households?? Job growth is still down a few million, and the only income is the upper classes' investments. The housing bubble has been caused by low interest rates, and low down payments, with interest-only mortgages, all of which will come back and bite the homeowners in the butt when interest rates go up or property values go down.

[TrogL]

36. What's he been smoking?

Can I have some?