Froth vs Bubble

Anyone looking for some clarity from Federal Reserve Chair Alan Greenspan on whether the United States Real Estate market is in a speculative bubble is probably asking the person least likely to provide a clear and understandable answer. 

Well, do we or don’t we?

Well, yes kinda, but not really, no.

That was Big Al’s answer to the question of whether we have a housing bubble in the U.S. or not.

"There are a few things that suggest, at a minimum, there’s a little froth in this market. We don’t perceive that there is a national bubble, but it’s hard not to see that there are a lot of local bubbles," Greenspan opined to the Economic Club of New York.

O.K., frothy, no national bubble; yet lots of smaller bubblettes. (Recall our prior bubblette discussion in February).

But don’t breathe to deeply just yet. Greenie noted that asset gains in Real Estate are unsustainable: 

"Without calling the overall national issue a bubble, it’s pretty clear that it’s an unsustainable underlying pattern. What we see are a number of forces, which are, as far as I can judge, not infinitely projectable."

Got that? Let’s review: Not a bubble, but Unsustainable. Not a national bubble, but local bubblettes.

Thanks for clarifying that for us . . .

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UPDATE MAY 22,2005   6:36am

Alan Abelson had a few choice words on the Fed Chief’s prognostications here. He equates Friday’s speechifying to the infamous 1996  "irrational exuberance" speech. (So we got that going for us, which is nice).

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Sources:
Greenspan Calls Home-Price Speculation Unsustainable
Craig Torres, Alison Fitzgerald
Bloomberg, May 20, 2005 18:04 EDT
http://quote.bloomberg.com/apps/news?pid=10000006&sid=ajYPxb8Ojdio&refer=home

Greenspan sees no housing bubble
Federal Reserve chairman says sector shows sign of
‘froth’ but doesn’t perceive a national bubble.
Reuters, May 20, 2005: 3:08 PM EDT
http://money.cnn.com/2005/05/20/news/economy/fed_housing.reut/?cnn=yes

A Bubble in the Housing Market? Any Implosion Won’t Be Obvious
Ken Brown
The Wall Street Journal, May 20, 2005
http://online.wsj.com/article/0,,SB111662227079239476,00.html

Greenspan Is Concerned About ‘Froth’ in Housing
EDMUND L. ANDREWS
NYTimes, May 21, 2005
http://www.nytimes.com/2005/05/21/business/21fed.html

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