Greenspan says "No Bubble"

May 21, 2005

Greenspan says that prices may "simmer down" as housing grows more unaffordable. Driving the demand are second-home purchases driving up the ratio of sales to existing inventory. However, there is no "bubble" because housing is so expensive and transactions too complicated. The market will adjust itself by leveling off when prices get too out of line. Does this mean the next opportunity is in rentals? If you cannot afford to buy, rent is the only other option.

In a related article in the Washington Post this morning, builders are putting restrictions on pure play speculators with language in contracts limiting the time period you can sell and/or demanding a share of the sales price if a unit is sold within a certain time period. There was anecdotal evidence of these curbs and this article tends to substantiate this as fact.

On the other hand, there are condominium advertisements in the Real Estate section proclaiming "Investors Welcome." Condominiums are the hot item in the Washington DC Metro area as they are the most affordable.

As the economy in this area continues to surge, it does not look like a slow down anytime soon. Home sales this year are outpacing the same period from last year by nearly 10%.

Go Alan!

Comment on Greenspan says "No Bubble". Follow this article is off. More articles like this one filed in: Market Conditions (with charts)