Housing Boom Doesn't Create Growth': Econ.

The New York Post had this to report. "It's not the end of the world, just the first signs that the housing bubble is beginning to deflate. That's the verdict economists delivered yesterday on the data that show an unexpectedly steep slump in the sales of existing homes in December." "The NAR reported sales of previously owned homes slid 5.7 percent in December over November levels, with about 6.6 million properties changing hands compared to 7 million in November 2005. The market had been braced for a decline, but not of this magnitude. More striking still, it's the third-straight month that the volume of real estate transactions has fallen since peaking at 7.35 million units last June." "For New Yorkers and others in the Northeast, the picture is slightly brighter. In contrast to steep declines in the South and West, sales of existing homes in the Northeast were flat in December." "Still, this is no time for complacency, economists agree. In a note fired off to clients, Ian Shepherdson, chief U.S. economist for High Frequency Economics, warned that this is just the start. 'We expect price increases to slow much further, dragging down expectations for future price gains and therefore raising real mortgage rates,' Stepherdson cautioned." "'This will be the trigger for a serious collapse in home sales later this week. The housing market is a bubble, and it will burst,' he said." And Newsday had this, "Real wages across Long Island fell during the past three years, leaving residents with declining incomes once they accounted for rising prices for everything from gasoline to health care to food." "In Nassau County, real average weekly wages fell 3.2 percent between the first quarter of 2002 and the first quarter of 2005, according to data collected from the regional Bureau of Labor Statistics and analyzed by Newsday. In Suffolk, the drop was 4.2 percent over the same period, while Queens saw a 3.7 percent decline." "The declines were widespread, in industries ranging from construction and manufacturing to leisure and hospitality and transportation. In Suffolk County, every industry saw wage declines except one. professional and business services, the data showed." "At a time when the region's economy has continuous job growth, rising housing prices and good consumer spending, the wage data is particularly disconcerting, area economists said. 'This really underscores that just because there's a booming housing market, it doesn't translate into strong economic growth,' said James Parrott, chief economist for the Fiscal Policy Institute in Manhattan. 'It suggests that consumption spending has a built-in speed limit to it. You just can't expect to grow very fast.'" "But even without real wage gains, consumers have kept spending. How? 'The answer is debt,' said Martin Cantor, the chief economist for Sustainable Long Island. 'The pump is being primed by debt, but not by real growth.'"