by Calculated Risk on 6/15/2005 06:35:00 PM

In a well coordinated attack, the Empire today unleashed a barrage of statistics and comments from in-house economists to poke holes in the silly notion of a "housing bubble". First up was Carl Steidtmann, chief economist of Deloitte Research:

"There has been much discussion recently about a housing bubble, but the truth is that home price appreciation has slowed considerably in the past three months. The time to talk about a bubble was last December," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index.

"Consumer spending growth in the summer months will be largely dependent on the direction of home prices and job growth," continued Steidtmann. "As job growth continues to accelerate, we should see a corresponding pickup in real wage growth."

By this logic you should have worried about the Nasdaq bubble in the late '90s, but in March of 2000 everything was fine. Not the best investment strategy. And "job growth continues to accelerate"? The 3 month moving average of payroll growth (Seasonally adjusted from the BLS) shows job growth is at best flat after peaking in the Spring of 2004.

But that was just the beginning. The ubiquitous David Lereah responded to Fed Chairman Greenspan's recent remarks:

"Yes, there is froth in the markets, but froth can be healthy," said David Lereah, chief economist for the National Association of Realtors. "It's not a bad word."

Froth for a foamy latte or cappuccino might be good; froth in the housing market, especially when you are a new home buyer, is decidedly not good.

Economists representing members of the Washington, D.C.-based Homeownership Alliance, which includes a coalition of about 15 housing-related organizations, fired another salvo: See Housing boom won't let up.

Frank E. Nothaft, chief economist for mortgage industry giant Freddie Mac said "there are signs of 'suds' around the country" (good in your beer) but he is not worried:

"I think we'll see some gradual moderation in house-price valuation over the next couple of years," with about a one-in-three chance of a region in the country seeing stagnant or declining home values over the next couple of years, linked to regional economic weakness.

Paul Merski, chief economist for the Independent Community Bankers of America added:

"Bankers are being very diligent now about their lending practices," and the FDIC is "closely monitoring bankers' lending practices right now due to the long run in the housing boom."

"(The notion) of exotic products out there that are extremely dangerous is well overblown."

Since bankers are being very "diligent", I wonder why the Office of the Comptroller of the Currency, the FED, the FDIC and other agencies took the highly unusual step of issuing new credit risk management guidance for home equity lending in May.

Merski also addressed the issue of home-price "froth." He said, "Economists have a saying that unsustainable trends will not be sustained," and that may hold true for some markets that have rapid, double-digit price appreciation. He forecast a "reasonable cooling off in certain markets in the prices but certainly no crashes in these markets because of the strong demand." Even so, the overall housing market should be strong for the rest of the year and going into 2006, he added.

No crashes. What a relief!

And finally, David W. Berson, chief economist for Fannie Mae added:

"There are no signs of any slowing in the housing market at all. You need a pretty good decline for the second half of the year not to set a record this year."

Those final comments are true; the housing market is still HOT.

For some reason I'm having the same reaction to all of these industry economists' comments as I do when the oil industry scientists assure me that global warming is not a problem. Maybe I need some suds!