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Gold/Mining/Energy : A to Z Junior Mining Research Site

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To: Jim Willie CB who wrote (3934)	4/4/2003 11:32:54 AM
From: 4figureau	Read Replies (1) of 5423

IMF sees chance of U.S. housing bust Boom in market could turn to slump By MARTIN CRUTSINGER THE ASSOCIATED PRESS WASHINGTON -- One more threat for the fragile economy: America's booming housing market could be headed for a bust. In a survey of global economic dangers, the International Monetary Fund warned yesterday that the housing market, after two years of record sales and strong increases in home prices, could be about to slump. The study said that based on experience, a housing bubble in an industrial country has a 40 percent chance of being followed by a sharp drop in prices. It did not explicitly forecast a bust, but did raise concerns, especially because past housing declines have been associated with periods of global economic weakness, such as the U.S. recessions in 1991-92 and 1981-82. The IMF study contrasts with Federal Reserve Chairman Alan Greenspan's belief that the U.S. housing industry is not headed for a sharp falloff in sales or prices. The record level of sales of both new and existing homes over the past two years has been spurred by the Federal Reserve's campaign to push interest rates to the lowest level in four decades. The idea is to bolster an economy hit by plunging stock prices, the 2001 recession, terrorist attacks on New York and Washington and corporate accounting scandals. While the report found that housing busts occurred less often than stock market slumps, housing declines tended to last longer and were a bigger drag on the overall economy. The IMF said stock market declines occurred on average every 13 years, lasted for about 2 1/2 years and resulted in a 4 percent loss in total economic output. By contrast, a period of sharp declines in housing prices tended to last nearly twice as long -- four years -- and resulted in a GDP loss that was twice as large as the GDP losses caused by a drop in stock prices. IMF officials stressed they were not saying the current 27 percent rise in home prices was an asset price bubble that was bound to burst -- but officials said economic policy-makers need to be aware of the potential risks. seattlepi.nwsource.com

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