The rapid rise in house prices – which has made Americans feel wealthy and inclined to spend over the last several years – won’t continue indefinitely, President George W. Bush’s top economist said today.
Still, a mild slowing in the buoyant housing market should not pose a danger to the country’s overall economic health, Ben Bernanke, chairman of the Council of Economic Advisers, told Congress’ Joint Economic Committee in Washington.
“House prices are unlikely to continue rising at their current rates,” he said.
“However, as reflected in many private-sector forecasts … a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year.”
Many private analysts would consider such growth to be around 3.25%.
Bernanke’s comments were part of wide-ranging testimony on the economy’s outlook. Bernanke repeated the Bush administration’s belief that the double blows of hurricanes Katrina and Rita would reduce economic growth in the short term, but the US economy’s longer-term growth path remains solid. That is consistent with the assessment made by Federal Reserve chairman Alan Greenspan and his colleagues.
Bernanke, a former Fed member, is mentioned frequently as a possible successor to Greenspan, whose 18-year run at the central bank is expected to end early next year.
Rising inflation, the nation’s employment climate, bloated budget and trade deficits, and the state of the housing market will be among issues confronting a new Fed chief.
On housing, the average home price soared by 13.43% during the 12 months up to June 30, the biggest gain in more than a quarter of a century, according to the Office of Federal Housing Enterprise Oversight.
Nevada had the biggest increase, 28.13%, followed by Arizona, 27.82; Hawaii, 25.92; California, 25.16, and Florida, 24.45.