No Housing Bubble

Last week, St Louis Fed Reserve President William Pool said at the Regional Chamber and Growth Association that, "My hunch... is that housing activity will stablize and remain at a high level this year." He also said, "Indeed, given that bubbles always burst... clear advance evidence of a bubble can never exist. If the evidence was clear, then everyone would know about the bubble and forthcoming burst, but then the buying that created the bubble would never occur in the first place." He then offered these words of comfort to those of us who own potentially overprice real estate, "So if you have an academic interest in house prices, I recommend that you wait a few years. If you have a direct financial interest, I can't help much, you're on your own".

Spoken like a true economist.

He believes that there is no national housing bubble, rather regions that may be overvalued. Real estate is all local. Californians should be a little nervous.

Hedging Price Risk
Want to play the downside in housing prices? The CBOE Futures Exchange announced they are launching futures contracts based upon median prices in the NAR existing-home sales data. This should spawn a new era in derivatives contracts. Just think, you can now write covered calls on your house. I wonder what the delivery on that would be like.