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Home Publications Blogs Beat the Press Do Obama's Advisors Really Not Know About the Housing Bubble?

Do Obama's Advisors Really Not Know About the Housing Bubble?

Thursday, 07 July 2011 04:55

This is the point that the Post should have been highlighting in an article about President Obama's comments on the housing market in his twitter townhall yesterday. Nationwide house prices had just tracked the overall rate of inflation from 1896 to 1996. In the decade from 1996 to 2006, house prices outpaced the overall rate of inflation by more than 70 percent.

At the point where President Obama took office, house prices had fallen by about 20 percent from their bubble peaks. Since there is no identifiable change in the fundamentals of the housing market, it is reasonable to expect prices to fall back to their trend levels. However, the article quoted Obama as saying:

“The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected.”

This statement reflects a frightening degree of ignorance about the housing market. It should have been the main focus of the article as the Post attempted to determine whether President Obama and his advisers could really not understand the housing bubble, the collapse of which has given the economy the worst downturn since the Great Depression.

Comments (5)Add Comment
written by hapa, July 07, 2011 5:26
i suppose there's no real difference between believing the lie, and knowing the truth but speaking & acting on the lie. maybe the second case feels worse on the receiving end.
Is that so?
written by shortale, July 07, 2011 8:41
"there is no identifiable change in the fundamentals of the housing market"

other than a grotesquely high unemployment rate, a grotesquely low percentage of employed adults, and a financial sector happy to get by on Fed carry trade.

As Bender says, "We're boned."
Definition of "housing market"
written by OppEd, July 07, 2011 9:38
The context in which you place the quotation suggests that "housing market" means only the price of housing. It's my impression that the term also refers to the rate of sales of housing. Is that just wrong?

If the term does refer to a combination of the two, how--if at all--does that change the degree of ignorance the quoted statement reflects?
Obama knows about the housing bubble.
written by Bill H, July 07, 2011 10:00
His conversation with the public is not designed to inform, it is cheerleading, designed to make people think the economy is better than it actually is so that they will vote for Democrats rather than for a change in government.
Housing Sales are Fine
written by Dean, July 07, 2011 12:24

If Obama was referring to sales rate, then this is about what should be expected. It is well below the peaks of the bubble years, but it well above the mid-90s levels.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.