What's Next for Real Estate?

We talked to two economists with starkly different views on the health of the housing market.

The will go down in the annals of history as one of the hottest real-estate markets ever.

From April 2004 to April 2005, home prices soared 15% nationwide, a gain not seen since 1980. In some local markets, particularly Southern California and Florida, the gains exceeded 30%. A record number of existing homes changed hands, and builders are on track to put up more homes than ever before, some 1.3 million units. This, of course, comes on the heels of a multiyear run-up that has exceeded every industry expert's expectations.

Was April the last gasp of speculative excess typically seen just before a crash, or a sign of a robust market that's in no immediate danger? Everyone from realtors in small towns across America to Federal Reserve Chairman Alan Greenspan has an opinion. Last week, Greenspan used the word "froth" in connection with some housing markets. "I think we're running into certain problems in certain localized areas," he said. "We do have characteristics of bubbles in certain areas, but not, as best I can judge, nationwide."

The comments reminded some of the first time Greenspan mentioned that the stock market was showing signs of irrational exuberance. Of course, that was in 1996, and the market went on to register three more years of outsize gains.

So which is it -- is the housing market on a delicate precipice or a solid foundation? We asked two economists for their take on the 2005 real estate market.

According to Dave Seiders, chief economist for the National Association of Home Builders, the underlying fundamentals of the real-estate market look healthy, and there are no signs of a slowdown in sight. Even if interest rates rise, as he expects, price appreciation will merely slow down, and prices won't decline on a national level. A bust, he argues, doesn't always follow a boom.