Housing Bubble - Bankers group debunks housing bubble

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Bankers group debunks housing bubble
New report says caution, not panic, appropriate in booming home market
By MICHELE DERUS
mderus @ journalsentinel.com
Posted: Aug. 23, 2005
One in three American homeowners needn’t fret over the existence of a housing price bubble. They own their places free and clear.

That’s one key piece of evidence in the national debate over the housing bubble - if there even is one.

“There is no national housing bubble,” Doug Duncan, the chief economist of the Mortgage Bankers Association in Washington, D.C., reiterated in a press teleconference Tuesday.

His remarks accompanied the release of the trade group’s analysis of America’s super-heated housing market. It is showing early signs of cooling, but there’s ample evidence that a strengthening economy will minimize the financial shock of rising mortgage interest rates and flattening values for most households, Duncan said.

The appropriate stance, according to the association’s analysis, is one of caution, not of panic.

“Strong economic growth means relative incomes are rising, and rising incomes help people meet their mortgage payment,” Duncan said. He co-authored the 30-page report, called “Housing and Mortgage Markets: An Analysis,” with four other association staff economists.

The analysis is chock full of economic data from a host of public and private sources, compiled in part to squelch what Duncan called “a crescendo on the issue of house prices” and whether they constitute a bubble about to pop into calamity.

The report explained why no housing bubble looms despite the fact that the average U.S. house price has climbed 50% in five years, much more than the 6% annual average since the 1960s.