Monday, September 19, 2005

‘A Fizzle, Not A Bang’

Standard and Poor 's said Monday that this bubble's going to leak, not pop. The report from John Spence of MarketWatch:
BOSTON (MarketWatch) -- The popping of the red-hot U.S. housing market will likely play out as a steady deceleration of prices followed by stabilization, rather than a dramatic national downturn, Standard & Poor's said Monday.

"The bubble should end with a fizzle, not a bang," said S&P Chief Economist David Wyss in a conference call Monday, adding that it's difficult to nail down exactly when the market might weaken, and what the implications might be for the overall economy.

Still, Wyss indicated that rocketing home prices in several parts of the country are unsustainable and cannot go on forever. Looming interest-rate increases are another potential problem that may affect two sectors linked to the housing market: home-builder stocks and real-estate investment trusts.

Credit rating and investment-research agency S&P unveiled multiple reports on the global housing market Monday.

Currently, the average U.S. home price is roughly 3.1 times the average household income, the highest in history and up from an average of 2.6 times since 1960, according to S&P. Driven by low mortgage rates and looser lending standards, home-ownership levels of 69.4% are also at an all-time high.

— The Boy in the Big Housing Bubble