Editore"s Note
Tilting at Windmills

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December 8, 2004
By: Kevin Drum

HOUSING BUBBLE REVISITED....It's been months since I had a housing bubble post, which means it's about time for another one. Today's comes courtesy of the UCLA Anderson Forecast:

In an outlook to be formally released today, forecasters say California and the nation are beset by a housing "bubble" that will depress construction next year, slowing the nation's economic recovery.

...."The housing sector's high and unusual contribution" to economic growth "is not going to continue in 2005," said Edward Leamer, director of the forecasting group and author of its national outlook.

The less-than-upbeat analysis is sure to raise plenty of eyebrows because the UCLA group was among the first to foresee the 2001 recession as well as slower growth earlier this year.

....In turn, the home-building slowdown will throttle U.S. economic growth to an annualized pace of 2.8% by the second half of next year, Leamer predicted. That is about half a percentage point lower than UCLA's previous forecast in September and contrasts with an expected inflation-adjusted growth rate of 4.4% for all of this year compared with 2003.

Of course, LA Times reporter Bill Sing also dutifully reports that "many experts inside and outside the housing industry reject the notion that there's a bubble waiting to pop." And who are these experts inside and outside the housing industry? The chief economists of the California Building Industry Association and the National Assocation of Realtors.

On the other hand, when you really do go outside the housing industry, here's what we learn: "A survey of 28 industry analysts and economists conducted last month by the Federal Reserve Bank of Chicago said the U.S. economy would cool next year because of a sharp slowdown in housing."

That's kind of pathetic. I wonder if Sing inserted that phrase himself or if his editors made him do it?

Kevin Drum 12:14 PM Permalink | Trackbacks

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