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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (34756)	7/1/2005 3:37:41 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 306849

Housing may sting more than dot.com bust Study: 15 states, representing 35% of the economy, are vulnerable to a housing correction. money.cnn.com WASHINGTON (Reuters) - Whether it's a national bubble or just pockets of regional froth, an end to surge in home prices could inflict economic harm that would make the 2000 tech bust look tame in comparison. Even if the market cools in only those parts of the country that Federal Reserve Chairman Alan Greenspan describes as "frothy," the U.S. has a serious problem. If prices were merely to level off, it could subdue the property-linked activity that has stimulated spending and job growth -- crucial supports for the U.S. economy. Based on benchmarks from a recent International Monetary Fund study comparing the stock and housing market bubbles, there are about 15 states that are vulnerable to a housing market correction. These represent about 35 percent of gross domestic product, the broadest measure of the nation's economy. "A significant correction in consumption spending in these states is bound to have significant effects on national growth," said Thomas Helbling, an economist at the IMF in Washington. Merrill Lynch estimates the impact on growth could be as much as one percentage point of gross domestic product. Add the knock-on effects to the rest of the economy to any initial spending hit and the situation looks worse. The IMF study found that while stock market collapses are more frequent, housing busts do a lot more damage. "The output loss associated with the typical housing price bust (about 8 percent of GDP) was twice as large as that associated with a typical equity price bust," the study said. <MORE>