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Home Publications Blogs Beat the Press Does a 13 Percent Drop in Homes Prices Since June "Reflect an Improved Economy"?

Does a 13 Percent Drop in Homes Prices Since June "Reflect an Improved Economy"?

Thursday, 24 February 2011 06:09

According to the Washington Post it does. The Post reported on the modest rise in existing home sales in January reported by the National Association of Realtors. The increase in sales was accompanied by a sharp plunge in prices with the median sale price now 13.1 percent below the recent high set in June.

As the article suggests, it appears that many investors were buying up foreclosed properties at low prices. This is a necessary part of the return to normal in the housing market, but it is a bit misleading to describe this story as reflecting an improved economy.

Comments (7)Add Comment
Raise Price, Sell More
written by izzatzo, February 24, 2011 6:39
This is big commie lie. Teabagger Elasticity Experts of America reports that the Obama Competition Plan has already taken hold as more houses are sold with efficiency gains that result in cost and price reductions in free markets.

Only socialists like Baker claim that demand curves slope upward in order to justify raising prices to sell more houses.

Stupid liberals.
written by Sean, February 24, 2011 8:36
Can we actually trust data from the National Association of Realtors?
A 13% drop in home prices
written by Floccina, February 24, 2011 11:08
A 13% drop in home prices, is a good thing.
Government Distorts Markets
written by Jay, February 24, 2011 11:22
It is important to note that you are measuring home values based on sales prices. Sales prices in the first quarter of last year were higher because Obama stole money from people not purchasing homes to subsidize homebuyers.

All we are seeing is the unwinding of unsustainable stimulus that was enacted as a bribe to purchase votes.
Wrong Metric
written by Jay, February 24, 2011 11:39
So the model needs to be specified as Y = C + B1X1 + B2X2 + e; where Y is home prices, the first independent variable measures the economy's effect on home prices, and the second independent variable measures the effect of the Obama stimulus on home prices.

What we know is Y is declining and the Obama "stimulus" is having a negative effect on home prices. It is inconclusive which direction the economy is driving home prices.
written by moopheus, February 24, 2011 2:12
Dean, I'm surprised at you, not even trying to account for something as simple as seasonality (if that's a word). Yo know darn well that home prices are weaker in the winter than in summer, no matter what the market is like. And yes, last winter we were still getting effects from the stupid house-price-inflation credits.
written by dilbert dogbert, February 25, 2011 12:13
Even the gods contend in vain against the Jays of the world.

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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.