By Boyce Thompson. Can you believe all the attention popular media have lavished on the mere potential for a collapse in real estate values? In terms of non-stories, this would have to rank up there with who would win "American Idol." I was really sweating that one.

A University of Missouri Journalism School graduate, I'm usually one of the first to defend the consumer and mainstream business press. For the most part, I believe they perform a great service for our country, though the news today doesn't seem as "hard" as it was 20 years ago, when I started my journalism career.

But what's with stories in Time, Fortune, and elsewhere that first raise the prospect that the equity in your house is going to dissipate faster than the returns in your 401(k) account, then reassure you deep in the story that it probably won't happen?

I wonder whether the spin masters on Wall Street aren't behind this. They watched their well-heeled friends take money out of the stock market and put it into much-safer real estate. They decided it had to stop.

Or maybe the popular media just decided they had missed enough stories--the dot-bomb and the now-legendary accounting irregularities at Enron and WorldCom--that they better make sure they reported this one before it was too late, even if they report in the next breath that Alan Greenspan says a bursting bubble is unlikely.

Fit to print

We reported on the bubble issue way back in March. (See "The Other Bubble".) The debate started with a report by Ian Morris of HSBC Securities USA. His basic contention: Home values have been rising faster than family income. Since 1990, family income has increased 3.8 percent a year, while home prices have gone up 4.8 percent annually. His theory: Home prices will fall because fewer people will be able to afford to pay them.

Indeed, American homeowners have been doing quite well of late. Federal data show that in the first quarter of this year, U.S. home prices rose almost 6.5 percent over the year before, well above historical averages. In only one of the 185 metro areas ranked by the Office of Federal Housing Enterprise Oversight were there declines in housing prices. The bubble hasn't burst yet.

To be fair, though, the argument put forward by Morris and others hinges on a spike in interest rates. And that's the bigger story here: What's going to happen to the housing market once interest rates start to rise? They aren't going to hover near 35-year lows forever. Clearly, people can buy more house with rates this low. They won't be able to afford as much house when rates rise. But will housing values start sinking faster than Gary Condit's polls? No.

Food for thought

So what do all these national economic headlines mean to the average reader of Builder? Not too much. If you aren't dead certain that you can sell a new enclave of ultra-luxury production homes, maybe this isn't the best time to be considering such a project.

As we report in this issue (see "Home Schooled"), some markets are starting to lose steam. In Denver, builders are running newspaper ads offering $30,000 off on homes for $400,000 and more. High-end markets in Atlanta and Houston have showed some weakness. And layoffs in textile and furniture manufacturing have hurt several North Carolina markets.

But for the most part, it's full steam ahead. Housing remains a great investment, especially compared with money market and mutual funds. A new report from Fannie Mae found that 70 percent of Americans view buying a home as a "safe and smart" investment. Only 38 percent felt that way about an IRA or a 401(k). Maybe it's time to speculate on the first phase of that new master plan down the street, if they'll let you in.

Boyce Thompson

Editor in Chief