The U.S. housing market should remain strong in 2006, and there is no national real-estate bubble that's about to burst, St. Louis Fed President William Poole said Wednesday.
Poole said it's nearly impossible to forecast a price bubble. "Indeed, given that bubbles always burst -- if there is no burst there was no bubble -- clear advance evidence of a bubble can never exist," Pool said. "If the evidence was clear, then everyone would know about the bubble and forthcoming burst, but then the buying that created the bubble would never occur in the first place.
"So if you have an academic interest in house prices, I recommend that you wait a few years. If you have a direct financial interest, I can't help much -- you're on your own," he said.
Poole said he did expect "some slowing in the growth of average home price nationally." But Poole dismissed fears of a nationwide housing bubble. He said research from the St. Louis Fed suggested that U.S. house prices "are not particularly unreasonable" based on fundamentals.
"It is hard to imagine ... the outlook could be more stable and healthier than it is right now," Poole said.
MarketWatch.com, March 8, 2006
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Housing to Stay Strong: Fed's Poole
By: Pete Kendall, March 15, 2006 |
Financial bubbles by definition always pop, and one of history’s great tip-offs to the fact that they are ready to do so comes when participants see the bubble for what it is and decide not to do anything about it.
The Elliott Wave Financial Forecast, January 2005 |
Did he really say "clear advance evidence of a bubble can never exist"? Have we not already heard this same line last decade? Do they ever learn? If only humans could think independently.
--Ryan Gordon
But then they wouldn’t be human and life wouldn’t be as much fun. As we’ve noted continuously (click here to see the most recent post and this month’s issue of The Elliott Wave Financial Forecast for the latest updates), the real estate boom is over. The conviction that it’s not a bursting bubble because it looks too much like one, or in this case because bubbles cannot be seen, is actually one more sign that the end of the great peak is nearby. As EWFF stated in July when the housing stocks topped out, “Some say real estate can’t go down too far because far too many people are concerned about a real estate bubble, but it is actually another sign of a top when participants are dismissive of warnings.” Nine months later, housing stocks are down a little less than 20%, inventories are rising fast and no matter how much evidence against further gains in prices mounts, people who ought to know better, like the head of a Federal Reserve Bank, continue to insist that it can’t be a real estate bust because mania’s are only visible in retrospect. This is just not true. As EWFF explained with our initial description of the "uh-oh effect" in March 2000, numerous observers called the stock market an unsustainable advance right before it collapsed in 1929. With that same observation and others as the NASDAQ bubble was peaking in 2000, EWFF showed that the same was true at that start of the great technology bust. We can certainly say the same thing now. It must be a bubble and it must be breaking because high level government economists that should be well schooled in the arts and sciences of booms and busts are working so very hard to convince the world that it can't be a bubble. In fact, the effort to deny the reality has reached such pathological proportions, it is wise to assume that something larger than just the real estate market is cracking, a long succession of bubbles that combine to form the Great Grandsupercycle peak |
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