Is the US economy on a roll? Sentiment in the commercial real estate market – as well as the direction of underwriting standards – suggests exactly that. This week's congressional testimony by Federal Reserve Chair Janet Yellen offers a chance for a reality check, or at least a look at the data. The clearest indication that markets may be overheating relative to broad fundamentals can be found in Fed policy itself. If the economy was growing near its potential rate, if the labor market was on an unambiguous path to full employment, and if the overall expansion was not unusually susceptible to external shocks, current monetary policy would be entirely inappropriate.

The Fed's affirmation that its current accommodation and pace of tapering remain sound tells us that policymakers still harbor serious concerns. While investors and consumers may have been numbed to these interventions, they are still extraordinary interventions by any historical measure. Part of the challenge is that Fed support is viewed as costless, with little heed to asset price inflation in securities and real estate markets.

As for the economic outlook, the projections betray expectations of growth well below the American economy's potential rate. From a business cycle perspective, the expansion is also getting long in the tooth (see The Next Recession). Confounding factors render the economy's sharp first quarter contraction difficult to interpret. But it has colored the forward-looking view for the next two years. The Wall Street Journal poll of economists sees GDP growth below 3 percent in 2014, 2015, and 2016. In a rising rate environment, slow growth implies elevated risks of asset price corrections, in property markets as much as anywhere.