Gee, brilliant conclusion: Fed 'could be wrong' about housing bubble

Watching these dolts think their way through the housing collapse (and their role in it) is like watching a monkey contemplate a banana. The wheels are turning, slowly, slowly...

One of the greatest risks to the U.S. economy is a possible sharp slowdown in the housing market, said Boston Federal Reserve President Cathy Minehan.

"The resulting rising stock of unsold new homes will likely bring about a modest decline in construction, probably accompanied by a gradual flattening of house prices," Minehan said. "As construction of new homes slows and the pace of growth in housing wealth eases, economic activity will be restrained. The question is 'How much?'"

The Fed's forecast assumes a flattening of home prices and a decline in construction, leading to a slight softening in economic growth. The Fed sees economic growth of 3.5% this year.

"Clearly, however, we could be wrong on the magnitudes," she said'. "Real estate prices could actually decline."