CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
Robert McTeer, chief executive of the Federal Reserve Bank of Dallas, told Hawaii Rotarians yesterday that the state's economy is poised to do even better than it's doing once the rest of the nation improves.
Fed banker warns
of isle housing bubbleMcTeer tells Honolulu
Rotarians that the state's
home prices are rising
faster than the U.S. trend
A monetary policy official uttered the "B" word yesterday.
The "B" word, in this case, is "bubble," as in housing price bubble.
Robert D. McTeer Jr., 12-year chief executive of the Federal Reserve Bank of Dallas, told Hawaii Rotarians they may be living in a real estate bubble.
McTeer, who spoke before the Rotary Club of Honolulu, said that there is no national bubble, except in a few communities.
"I would be careful if I were you," he warned, noting that Hawaii home prices have been rising faster than the national trend.
In July, the national median home resale price rose 12.1 percent to $182,100, according to the National Association of Realtors.
On Oahu, the single-family median price jumped 21.9 percent, to $390,000.
McTeer also said that Hawaii's economy has been doing well, compared to the rest of the United States, and that Hawaii is poised to do even better when the rest of the nation improves.
The state predicts that Hawaii's economy will grow 2.6 percent this year, then slow to 1.8 percent growth in 2004 and 2005. The state's economy shrunk 0.1 percent in 2001, per the real gross state product.
During much of his speech, McTeer spoke about the outlook of the national economy in bullish terms, with a prediction that good growth will occur in the last half of the year.
McTeer said the combination of easy money -- in the form of historically low interest rates -- and federal deficit spending are bolstering the economy. McTeer is a nonvoting member of the Federal Open Market Committee, which last week kept the overnight bank lending rate at a 45-year low of 1 percent.
McTeer noted that President Bush's tax cuts appeal to supporters of Keynesian economics, who favor economic stimulus by government, as well as supply-siders, who favor tax cuts as an investment incentive.
Of deficit spending, McTeer said, "It's a bad idea whose time has come."
McTeer also took note of recent job cuts nationwide, and said the U.S. economy has entered an era of heightened productivity, where the economy will have to grow faster to ease unemployment. The upside is that people will become wealthier faster, he said.
The economy shed 93,000 jobs last month, even though the economy is growing about 4.5 percent this quarter, according to a median estimate of economists surveyed by Bloomberg News.
Bloomberg News contributed to this report
