Real estate booms not always followed by busts

Economists weigh in on debate

WASHINGTON, D.C. – How do you define a housing boom? Does a bust always follow a boom? What's the difference between a significant slowdown and an absolute bust?

With real home-growth prices (appreciation minus inflation) rising to their highest levels since the data was first collected in 1977, the Federal Deposit Insurance Corp. has brought some definition to the amazing national housing picture, announcing that there were 55 boom metro markets at the end of 2004, up from 32 a year earlier.

Boom markets, where real price-growth increases at least 30 percent over three years, were heavily concentrated in California (21), the Northeast (18) and Florida (11). And, according to the FDIC, boom does not necessarily lead to bust – only 17 percent of all housing booms ended in busts. Most busts were preceded by a significant stress in local economies, such as loss of jobs. A bust is defined as a nominal drop of 15 percent over five years.

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