No reason for housing bubble burst

WASHINGTON - People may be talking about whether there's a housing bubble ready to burst, but Harvard University economists see little reason for homeowner gloom: U.S. home prices have been climbing for 13 years, with the rise in 2004 the largest annual jump since 1979, according to a new report from the university's Joint Center for Housing Studies.

Federal Reserve Chairman Alan Greenspan last week warned that home prices in some areas are "unsustainable." In a report to be released today, however, the Harvard economists say the market continues to be fueled by easy credit, low interest rates, affluent baby boomers buying second homes and the continued growth of immigration. Moreover, thanks to an expanding economy, regulatory constraints and a limited supply of land for development, they see no sign of a slowdown.

"The muscularity and potency of this market continues to amaze," said Nicolas P. Retsinas, the center's director and a former assistant secretary for housing at the Department of Housing and Urban Development.

Most housing indicators set records in 2004, the report noted, including homeownership rate, new home sales, existing home sales and single-family housing starts.

But some Americans have been left out of the party, according to the report. Renters face a diminishing supply of apartments because rental-housing construction fell to a 10-year low in 2004 and affordable units that are being demolished to make way for high-end condominiums are not being replaced, according to the report. Many renters can't afford the new units being constructed. About half of renters face "severe cost burdens," the report said.
KIRSTIN DOWNEY
The Washington Post

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