Colony Capital’s Barrack Sees Bubble in U.S. Housing Market

Colony Capital LLC’s Tom Barrack said U.S. homes are in danger of becoming overvalued as low borrowing rates and a strong labor market fuels demand.

“We have asset bubbles for sure and asset bubbles are necessary when you don’t have growth” in the economy, Barrack, Colony’s founder and chairman, said today in an interview at the Bloomberg Doha Conference. “If you go to new homes, the builders have to buy lots, so the next stage we are going to see is a land boom.”

The S&P/Case-Shiller index of residential-property values in 20 U.S. cities rose in January by the most since June 2006, the group said on March 26. The improving market will encourage property owners to put their homes on the market and prompt construction companies to start work on new buildings, boosting the economy.

Colony Capital is among the private-equity firms that are competing for a limited number of homes on the market. The Santa Monica, California-based firm has raised $2.2 billion for rental properties.