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Economist: at Least 20 Big Cities Face Housing Bubble.
There is definitely a housing bubble out there, according to at least one economist. Scott Franklin, the featured lunch session speaker at the MBA's Commercial Asset Administration & Technology Conference here, said that the good news is that he sees a bubble in only 20 big cities. However, these cities contribute 50% of housing wealth in the United States overall, according to him.
About the prospects for the economy going forward, he said that there are two distinct views, one bullish and the other bearish.
The bulls believe that inflation is going up, considering that the decline of the U.S dollar, especially against the euro and the yen, has rendered exports to Europe and Japan cheaper for consumers in those countries. And commodity prices are also going up. Corporate profits are on the upswing, too, and this is likely to translate into increased hiring and hiking up of inventory levels by corporate America.
Also, the inventory-to-sales ratio is very low right now, which means that firms will need to start replenishing their inventories.
To the bulls, all this indicates that interest rates are going to start going up, Mr. Franklin said. If they start going up though, they will go up gradually and not in increments of1%, the way the Federal Reserve acted to raise interest rates in the recovery of 1994, according to Mr. Franklin.
As for those in the bear camp, they say, "Wait a minute, this recovery is not built on rock. It may not even be built on sand," he noted.
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Source: HighBeam Research, Economist: at Least 20 Big Cities Face Housing Bubble.