Tuesday, April 04, 2006

Lenders Believe in Bubble

It looks like lenders think a bubble exists. No link

NEW YORK (Dow Jones)--About two-thirds of lenders believe a housing bubble exists in the U.S., and half think it has begun to burst or will blow up in the next six months, according to a new survey.

A Phoenix Management report, released Tuesday, found 66% of the 92 lenders who took part in the survey believe the country is currently in a housing bubble, up from 46% a year ago.

"In the minds of lenders, the housing bubble has moved from Loch Ness monster myth status to an economic reality that could have a significant economic impact on the lives of many Americans," said Michael Jacoby, managing director and shareholder of Phoenix Management, an advisory firm that provides turnaround, crisis and interim management and investment banking services.

When asked when the bubble might burst, 77% said they believed it would happen within the next 12 months: 30% believe the bubble is already starting to blow up, 20% predict it will happen in the next one to six months, and 27% forecast it in seven to 12 months.

If a housing correction occurs, 50% of respondents said they believe prices would decline up to 10%, 43% expect a 20% price decline, and 7% see prices falling up to 30%.

The survey found 30% of lenders believe the Northeast region would be hit hardest by a housing correction while 27% believe the West would be affected most.

Despite their concerns about a housing bubble, most lenders do not see real estate as the greatest threat to the health of the U.S. economy. Instead, 38% named the deficit, 18% listed the war in Iraq, 14% named the current trade deficit, 12% listed the sluggish job market, and 9% named a low household savings rate. Only 3% named a potential real estate bubble as the biggest concern.

The survey questioned 92 lenders from commercial banks and commercial
finance companies across the country in January and February.

- Janet Morrissey; Dow Jones Newswires; 201-938-2118

(END) Dow Jones Newswires

4 Comments:

Anonymous Anonymous said...

This reminds me of the CNBC Real Estate special. I think they had the CEO of ELoan (or another major web lending company?) on with several real estate leaders and Prof. Schiller (sp?). He agreed with Schiller and thought there was a bubble. Based on this industry's REAL understanding of affordability, I think they have a more objective opinion on an out-of-whack market.

Wednesday, April 05, 2006 2:30:00 PM  
Blogger James Baker said...

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Wednesday, April 05, 2006 6:27:00 PM  
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