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10 Young Law. (ABA) 1 (2005-2006)

handle is hein.journals/yglwyr10 and id is 1 raw text is: LA American Bar Association Young Lawyers Division YER Volume 10 -Number 1 October 2005 B,)o om o r Preectng By Hal D. Coffey s housing prices soar to new heights, you may be noticing a dramatic increase in the cost of home- ownership in your town, no matter where you may Live in the country. The prime ques- tions on everyone's minds are When will this housing bubble burst? and How do I protect myself now? First, some residential hous- ing economics. Many econo- mists differ greatly about whether we are in a bubble or boom or some different, entire- Ly new state. A bubble is generally regarded as an unhealthy climb in the price of real estate, far outdistancing the rate of infla- tion or rise in household incomes. When that bubble bursts, housing prices tumble and usually cause a recession or bust in that Locale. A boom occurs when at the height of real estate values, a market correction takes a more gradual pace, taking values down to more realistic numbers. In 1989, N. Gregory Mankiw, current chair of the Bush administration's Council of Economic Advisers, predicted that an 18-year cycle for a housing boom was a reasonable measure to calculate the next bust. His prediction of 2007 for that time could still be achieved. Federal Reserve Chair Alan Greenspan is among those who believe we are not in the throws of a real estate bubble but rather a sustained climb in prices attributable to the cur- rent interest rate and general economic conditions. m continued on page 3 - g