Thursday, August 25, 2005

Will The Bubble Burst in Spring '06?

A bold prediction by Princeton University economist Paul Krugman — The U.S. housing bubble will burst next year.

From Reuters:
CAMPOS DO JORDAO, Brazil, Aug 25 (Reuters) - Soaring housing prices in the United States have created a real estate bubble that will likely burst early next year, Princeton University economist Paul Krugman said on Thursday.

"I'll give you a forecast which might very well be wrong, but I think it will burst in the spring of next year," he said at a derivatives conference in Brazil's winter resort of Campos do Jordao.

"I would be surprised if it doesn't burst in the next three years," he added.

Krugman said skyrocketing U.S. housing prices were supported by large -- and somewhat "odd" -- capital inflows from emerging market countries, such as China, which has accumulated huge holdings of U.S. Treasury debt, helping push down yields.
Read the entire story at this link.

— The Boy in the Big Housing Bubble