Tuesday, January 03, 2006

Pop goes the housing bubble?

CNN Money.com has a piece on Federal Reserve Chairman nominee Ben Bernanke and what he might expect his first year. One secton of the story deals with the housing bubble:
There is little disagreement among economists, builders and real estate execs that the white hot housing market is going to slow in 2006.

The question is whether it is a gradual slowdown or a more drastic, broad-based decline that sends home prices tumbling, rather than stabilizing or dipping gradually.

If it's the former, there's probably little for Bernanke to worry about. But if the so-called housing bubble does pop, it has potential to hit not just home sellers and builders but also the nation's financial markets and the broader economy.

"I would attach a reasonably high probability that there will be a problem in the housing or finance markets that will test the next Fed chairman," said Zandi.

— The Boy in the Big Housing Bubble