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 . . .


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).


Greenspan Calls Home-Price Speculation Unsustainable
Craig Torres, Alison Fitzgerald
Bloomberg, May 20, 2005 18:04 EDT

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

A Bubble in the Housing Market? Any Implosion Won’t Be Obvious
Ken Brown
The Wall Street Journal, May 20, 2005,,SB111662227079239476,00.html

Greenspan Is Concerned About ‘Froth’ in Housing
NYTimes, May 21, 2005


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