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Ben Bernanke's new housing bubble?

Posted by Scott Van Voorhis May 8, 2013 06:57 AM

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The good news, at least for home sellers, is that prices are likely to post another sizable gain in 2013.

The bad news? A growing number of economists now worry Fed Chairman Ben Bernanke's policy of keeping interest rates at rock bottom levels could be inflating a new housing bubble.

A recent survey commissioned by Zillow of 105 economists around the country found roughly half have serious concerns about the Fed's interest rate manipulations.

Forty-eight percent of the market observers polled found a "moderate to high risk" of a new housing bubble forming, according to Zillow. Just 4 percent saw no risk at all.

The vast majority of the economists - 81 percent - also expressed support for requiring a minimum down payment, though maybe not as high as 20 percent.

Most of the economists are also betting on a continued run up in housing prices this year, with predictions of a 5.4 percent increase over by the end of 2013.

The survey was conducted for Zillow by Pulsenomics.

This wouldn't be the first housing bubble Bernanke missed. Back in 2005, when he was before Congress getting confirmed as Fed chief, Bernanke saw no evidence of a housing bubble.

At that point, housing prices nationally had just risen 25 percent over two years.

Here's a section from a Washington Post piece on those long-ago Bernanke's confirmation hearings - given all that we know now, it's almost comical.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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