>One of the truly memorable utterances of Chariman Greenspan and not
>a peep about it on LBO.
>
>"There are a few things that suggest, at a minimum, there's a little
>froth in this [housing] market," Greenspan told the New York
>Economic Club Friday. While "we don't perceive that there is a
>national bubble," he said "it's hard not to see that there are a lot
>of local bubbles."
>
>http://www.hawaiian-music.com/real2/bubbles.html
>
Don Ho's getting some back-up vocals:
UPDATE 1-Guynn warns US home speculators playing with fire Wed May 25, 2005 02:07 PM ET
WASHINGTON, May 25 (Reuters) - Some people who are gambling that housing prices will soar indefinitely are bound to get hurt, the president of the Atlanta Federal Reserve Bank, Jack Guynn, warned on Wednesday.
"There are some local markets, especially in coastal Florida, where I've heard stories for more than a year about behavior that's got to be characterized as nothing other than speculation," Guynn said it response to questions after addressing a home builder's group in Atlanta.
"It makes me very uncomfortable," he added, "Some buyers, some builders, some lenders are going to get burned, could very likely get burned, in some of those local markets."
Some U.S. central bank policy-makers are saying they are more worried about surging housing prices, which have the potential to burst and to hurt would-be buyers and builders who are over-extended or buying on the belief that prices will keep rising endlessly.
Guynn's remarks seemed almost coordinated with a caution that Fed Chairman Alan Greenspan offered last week to Americans who speculate in real estate. On Friday, Greenspan said he saw signs of "froth" in housing markets though he did not characterize it as a worrying national issue. "We don't perceive that there is a national bubble but it's hard not to see ... that there are a lot of local bubbles," Greenspan told the New York Economic Club.
One factor fueling the booming pace of home building and sales -- of both new and existing homes -- is that long-term interest rates including for mortgages have remained low by historical standards and have even come down.
That has happened despite the Fed's current rate-rising campaign, which has taken its federal funds rate up eight times in quarter percentage point increments to a current level of 3 percent. Generally, longer rates follow short rates up or down but the tie between the two has been looser this time.
"I've certainly been among those that's been surprised that the usual pattern of longer-term rates at least partially following short term rates up has not shown itself this time," Guynn said.
One possible explanation is that financial markets believe inflation will remain low so they may be adding in a smaller "inflation premium" to longer-term loans, Guynn said, adding "If that's the case, it's a very happy development."