by Calculated Risk on 2/15/2005 05:53:00 PM

Yesterday I posted a cautionary report from the FDIC. Today, we have the National Association of Realtors with a bullish report on housing. The NAR reports that Record No. of Metros Show Double-Digit Home-Price Gains.

David Lereah, NAR's chief economist, says it's a simple matter of supply and demand. "We ended 2004 with a record low supply of homes on the market," he says. "With more buyers than sellers nationally, what we're seeing is a natural pressure on home prices as buyers compete to bid on available properties. Fortunately, the historically low cost of debt service on a home purchase means that we have a comfortable buffer in most of the country because the typical family can afford to buy a home well above the median price."

And Lereah went on to say that analysts looking for bad news will be disappointed.

"In the handful of areas with price declines, none had previously experienced rapid price growth," he says. "In fact, they were all lower-cost areas experiencing one or both of the conditions necessary for temporary price softness—local economic weakness, mainly in jobs, or a large supply of homes available in the local market."

And more bullish comments from NAR President Al Mansell:

"Although temporary price declines are always possible under the right conditions, people who were scared off by faulty predictions have missed out on the strongest housing market in U.S. history," he says. "Considering rents on comparable properties generally are higher than mortgage payments, and housing returns generally are multiples of a downpayment, a little perspective may help. The population is growing faster than the supply of homes, the cost of construction rarely declines and the long-term prospects are positive—one of the largest generations in U.S. history, who believe housing is a good investment, is just entering the years in which people typically buy their first home."

Don't Worry, Be Happy.