Alan Greenspan says housing price boom will slow.

Is housing a bubble about to burst? Alan Greenspan, chairman of the Federal Reserve, may have dismissed the idea of a bubble in the United States, but he believes that the house-price boom will slow this year. The IMF said Britain's house prices may be over-inflated, and the OECD fretted about the Australian market. If any of these markets burst, consumer spending would suffer too. According to this week's Economist magazine, housing markets in several countries including the United States, look decidedly bubbly.

In the U.S. in real price terms, the average price gains over the past few years have been the fastest in history. The housing boom, however, is already slowing: the average price of a home rose by 7% in the year to December, compared with an 11% gain during 2001.

In the fourth quarter, prices rose at an annual rate of only 3.3%, the slowest since 1997. Moreover, national figures conceal local bubbles. Parts of California and New York have seen house-price increases of more that 80% in the past five years.

In other countries, markets continue to bubble merrily. Britain, Ireland and the Netherlands have seen average annual price increases of more than 10% since 1995.

The Irish housing market, which saw a brief fall in prices in 2001, has taken off again with the average home costing three times as much as in 1995. Out of 13 countries covered by The Economist in the past year to the fourth quarter, eight rose and five fell. Falling prices were seen in the Dutch market, where the bubble is now bursting, as well as in Germany and Japan which have yet to recover from the bursting of property bubbles in the 1 990s. In both countries, prices are lower than in 1995.

Greenspan acknowledges that there are local hot-spots in the United States but rejects the notion of a national housing bubble, arguing that high transaction costs discourage the buying and selling frenzy seen in financial market bubbles. He also sees little sign or an over-supply or new homes, which could later cause prices to plummet. Housing-market analysts, too, insist that prices will not crash. Lower interest rates they argue, justify a higher pie ratio for housing.

Granted, says The Economist, nominal house prices have in the past fallen less often than share prices, partly because owners, reluctant to accept a capital loss, delay selling. The volume of sales, rather than prices, tends to shrink. But, times may be changing. The Royal Institution of Chartered Surveyors has found that some homeowners in London, worried about wobbly house prices, are selling and renting, in the hope of locking in a profit before prices fall. Is the U.S. safe from bubbling up? Don't bet the house on it.