The Housing Market ? Are We Blowing a Bubble?

Hi, Here is an interesting article on US housing market ! The Housing Market ? Are We Blowing a Bubble? January 2005 By: ChartingTheEconomy.Com Is there a housing bubble? This question has been the topic of much debate in recent months with strong advocates on both sides of the argument. In this report it is concluded that a bubble is forming. However, whether the bubble will continue to grow, burst, or just deflate slowly, is more difficult to predict. What is clearer is that the scenario is closely linked to future movements in interest rates. In the equity markets an increase in demand that is not supported by long term fundamentals can lead to the formation of a bubble. The housing market is not altogether different though some would like you to think it is. The affordability of housing is a primary factor in the increase in demand. As the affordability of housing improves, demand increases and visa versa. The primary factor over the past decade in making housing more affordable has been declining interest rates. However, as with the equity market, affordability as compared to alternative choices needs to be examined to get the whole story. Another key to defining a bubble in any market is an examination of speculation and its presence in and effect on the market. Finally, a look at whether the improved affordability and increased demand in housing is based on long term fundamentals or short term trends is critical to determining if a bubble exists. The following report will examine each of these areas. continued.. http://www.chartingtheeconomy.com/HousingBubble.html -desi