Freddie Mac President Admits to a RE Bubble

According to this article in the Contra Costa Times, Freddie Mac's president, Eugene McQuade, admits that there is a real estate bubble and that hot markets like the Bay Area are most susceptible to a correction.

Some choice quotes:

"Call it a bubble, froth or lather, the Bay Area housing market is a party that has to end, the top boss at mortgage giant Freddie Mac warned Friday."

"Mortgage borrowers and residential real estate speculators are particularly imperiled as the market peaks, said Eugene McQuade, president of Freddie Mac, officially the Federal Home Loan Mortgage Corp., the company established by Congress to keep mortgage money flowing and stable."

"People who have adjustable-rate or interest-only mortgages could see their budgets stretched as interest rates rise. And those who bought second homes in hopes of a quick profit could face bankruptcy as the equity in their investment properties evaporates in an atmosphere of flat prices, McQuade told a Rotary Club economics conference in Concord."

"Nationwide, the country is not perched on a bubble, McQuade said. But the landscape is more ominous in places with white-hot realty markets such as the Bay Area, added McQuade..."

""Let's face it, the big run-ups on both coasts and in places like Las Vegas are not sustainable," he said. "Nor should they be.""

"That sentiment was echoed by Steve Wood, a Danville-based economist who gave a far more blunt assessment of the housing market in the Bay Area and around the country, regardless of how the head of the Federal Reserve might portray matters."

""There is a housing bubble," Wood said. "Alan Greenspan can deny it all he wants, there is a housing bubble.""

""The housing bubble may apply to only about 60 percent of the country, but if that bubble bursts, it will affect 100 percent of the nation's population," Wood said."