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Week of May 10, 2004

Front Page

President's Message

* For Working Families, Affordable Housing Is in Short Supply

Housing and Economics

* Consumers Win Latest Round in Canadian Lumber Dispute
* A Housing Price Bubble Does Not Exist, Freddie Mac Economists Say
* Eye on the Economy

Housing Politics

* Sarbanes Blames ‘Ideologues’ for Impasse Over GSE Reform Legislation
* Provisions in Habitat Reform Bill Supported by Builders
* NAHB Unveils Virtual 'Get Out The Vote' Election Web Service

Business Management

* NAHB Kicks Off General Liability Insurance Initiative
* Review Your Accounting Reports to Protect Yourself From Fraud


* Supreme Court Decision Brings Good News on Residential Construction Equipment
* Storm Water Permit Guide Available at


* Stillman Knight Honored for Affordable Housing Efforts
* High-Density Housing an Opportunity for ‘Urban Quality’ Design

Small Builders and Remodelers

* Build a Brand: Become a Household Name
* Publicize May as National Remodeling Month in Your Market


* Survey Says Buyers Want Laundry Rooms, Linen Closets
* Best in American Living Awards Accepting Entries

Seniors Housing

* HUD Urged to Provide FHA Insurance for Age-Restricted Elderly Housing
* Not-So-Big Homes Provide Unique Marketing Advantages

Legal Issues

* Texas Town’s Misconduct Not Enough to Show Taking

Housing Finance

* Responses Sought on HUD Proposal For Fannie Mae, Freddie Mac Housing Goals
* National Housing Conference to Honor Angelo Mozilo for Lowering Homeownership Barriers

Codes and Standards

* Stair Geometry, Window Sill Heights on Hearings Agenda


* Second International Housing Conference of the Americas Promotes Business Across Mexican Border


* NAHB Members, Job Corps Students Help DC Habitat in Family Build

Building Products

* Vinyl Siding Stays Put During Severe Weather

Builder's Engineer

* Gold-Fringed Business Cards?

Building News Coast To Coast

Association News & Events

* Calendar of Events

NBN Back Issues


A Housing Price Bubble Does Not Exist, Freddie Mac Economists Say

A healthy run-up in home prices over the past several years shouldn’t be misconstrued as a sign that there is a bubble that’s getting ready to burst, Freddie Mac economists said last week.

“We believe that at the national level a house-price bubble does not exist, and, in nearly all metropolitan areas, rising home values are firmly rooted in economic fundamentals,” wrote Amy Crews Cutts and Frank Nothaft in special commentary from Freddie Mac’s Office of the Chief Economist.

The economists said they don’t expect to see residential real estate values crash because inventory levels are at record low levels. Also, the transaction costs involved in selling a house average $20,000 compared to a $9.95 commission on an online broker, and that’s an impediment to the type of speculation that led up to the stock market crash of the 1990s.

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The Freddie Mac analysts also calculated that it has been less expensive to own than to rent similar properties since 2000, and the cost of owning a home has been generally declining for more than 10 years. “Thus, it is understandable that homeownership rates keep rising even with a weakened economy,” they wrote.

“Clearly, some localized housing markets are at risk — those with a highly inelastic housing supply, such as San Francisco, for which demand shifts translate into large price movements — and they could see a fall in home values if demand drops,” according to Nothaft and Cutts. “But that is not a bubble, it’s just fundamental volatility.”

To read the complete commentary, including three charts, click here.
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