Industry News

‘So-called bubble’ likely to deflate, not burst

Harvard University report highlights affordability problems

House prices surged faster than household income and inflation, the national home-ownership rate fell for the first time in over a decade, housing inventories shot up with slowing sales, and the volume of sub-prime loans has soared. But despite these findings, released today by Harvard University's Joint Center for Housing, the outlook for the housing market is generally good. "The greatest threat to housing markets is a precipitous drop in house prices. Large house-price declines appear unlikely for now. But if the economy falters, both job growth and housing prices will come under renewed pressure. This would spark higher default rates, especially among sub-prime borrowers, and turn housing from an engine of economic growth to a drag," according to the report, "The State of the Nation's Housing 2006." By 2005, house prices were rising at the fastest pace since 1978, the report states, and "media reports of a housing bubble reached a fever pitch. But, when and if house prices do fall...