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Greenspan--US real estate market not facing bubble

February 12, 2003
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WASHINGTON, Feb 12 (Reuters) - Federal Reserve Chairman Alan Greenspan said on Wednesday there was no major imbalance between U.S. housing construction and underlying demand, and that the real estate market was unlikely to collapse.

"When you measure the level of new (housing) construction ... what you find is that it is barely in excess of the aggregate increase in occupied households or household formation," the Fed chief said in response to questions from the House of Representatives Financial Services Committee.

Greenspan said immigration was helping to buoy household formation and that the data, "suggests that we don't have a demand for housing which could all of a sudden slip."

"We are effectively not building up a glut of excess housing. Under those conditions, one would presume that even though we have been having some fairly strong gains in home prices, it is our conclusion ... that it is unlikely that we are confronting a housing bubble," he said. "Certainly the analogy to stock market bubbles is inappropriate," the central banker said, noting that large transaction costs, such as real estate agent commissions and relocation expenses, prevent the type of speculative housing demand that leads to bubbles.

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