Yes, Virginia, there is a housing bubble

New houses are remaining unsold for the longest time in 14 years; new housing prices are turning negative; and the supply of unsold homes is now at 8.5 months’ worth. Oh, and first-quarter economic growth nationally was just 0.6 percent.

See the story in pictures here. For more of the story in words, go here.

The National Association of Realtors state data does show sharp year-over-year corrections in major states: 28% drop in Florida, 24% drop in California, and a 28% drop in Arizona. Our data, however, shows the sales have probably dropped by 34%, 27% and 38%, respectively. The national numbers include some large states where sales volumes have not corrected substantially, such as in Texas and Ohio, but we believe these markets are not very healthy for other reasons. Interestingly, our calculations were tracking very closely with NAR data through 2005, as illustrated above. We did investigate NAR methodology and have found absolutely no reason to believe that the NAR is intentionally misleading anyone, as some have suggested.

The full Burns report this is from is here.
Add to that the fact that Burns says some of the states that look good on paper, like Texas, really aren’t so good themselves, and it sounds even worse.

No, it’s not fun sounding like a Cassandra. But, politicians simply aren’t talking about this enough yet. Nor is the Fed, other than Ben Bernanke essentially saying, “Look away… what problem?”

On the Democratic side, if they screw up Iraq and get caught holding the short end of a stick on a recession that’s ultimately Alan Greenspan’s fault, they’ll be back out of power in 2008 if they’re not careful.

On the other hand, this has to play out, in some way. Greenspan contributed to the housing bubble by not talking the tech bubble down before it got too big, then letting housing bubble up to siphon off the tech bubble’s irrationality.