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Is Anyone Ever Going to Tell the Washington Post About the Housing Bubble?

Wednesday, 22 June 2011 05:07

It must be very hard to get information over at Fox on 15th Street. They still do not seem to have heard of the housing bubble. The Post noted the weak sales in existing homes for May reported yesterday, as well as the drop in prices, and told readers:

"The housing market is still struggling to recover from a historic slump, according to industry data released Tuesday."

Of course it is not struggling to recover from a historic slump. It is correcting an unprecedented bubble. There run-up in nationwide house prices between 1996 and 2006 was a break with a hundred-year long trend over which nationwide house prices just kept even with the overall rate of inflation. Over this period, they outpaced the overall rate of inflation by more than 70 percent.

It was the collapse of this bubble that gave us the huge economic slump than the country now faces, but apparently the Post still hasn't heard about the bubble. House prices have to fall another 8 percent or so to get back to their trend level. Rather than expecting a rebound, we should be expecting a further decline.

Comments (3)Add Comment
written by paine, June 22, 2011 9:30
"It was the collapse of this bubble that gave us the huge economic slump that the country now faces"

the lot value bubble pop indeed
triggered the virtual toxic waste implosion
inside big hi fi
that itself in turn triggered
the repo** contraction
we all oughta know that by now
even the dutiful ivy educated
scribblin' field hands
attached to the washpost plantation

---*** repo contraction ?? a place to start
on this picked at random :

but now all this time since
say winter spring 09
we have played slump ball
not because the credit markets were frozen
or contracting
but because not just wally worlders
even regular good old fashion
planetary pov trans boder
in the various macro bureaucracies in the northern economic hemisphere
"make us a a stagnation
for a number of coherent
ahhh from their "global" perspective

my point:

too much emphasis on the bubble
distracts from
the exceedingly artificial nature
of the present slump

okay household spending is off
since household borrowing is off and job slack is rampant
but nothing prevents uncle from fully off setting that source of the spending slump
yes you gotta plus in the trade gap
and the corporate pussy foot path of post crunch spending too


f the private banks
since its only some kind of effective demand we need not privately sourced credit lines
then since uncle makes his own credit line
when and if he wants to ...

if he can't get his several macro-heads
to operate in unison
and toward a full fast recovery*****
its cause he doesn't choose to
and of course between elections he and his center aisle party volunteers
are indeed free to choose if not out right misery then high anxiety and low wage gains
for the jobbled or pre or post jobbled majority

****recovery ??

why specifically
n the job market of course

instead of an implicit target rate
of wage increase
set a target rate of net new employment formation

i suggest we target a net job formation rate
that equates one for one
"job opens to " job seekers "

and btw since i'm putting
a battle ship in a bottle here

why not add

a big
"go to paper chase hell"
for any techno-eunicks'
screams of "we may be crossin the taboo line "

loving a stag out of
frights in the night
over possible
accelerating wage driven product inflation

such fears are for
uncertified citizen nitwits
and well compensated
corporate pomp pomp gunners

the majority class ie the job class
and for the job class macro goal numero only is a blazingly hot job market

oh and demand the pointy heads close
the various deficits that widens

they can if they will

written by Jeffrey Stewart, June 22, 2011 12:10
You tell them all the time. They don't listen. It is "labor in vain to open the eyes of those who do not want to see."
written by urban legend, June 22, 2011 5:44
You can pick your periods however you want to make a case, but I don't know about lumping in 1996 through the start of 2001 as part of the "bubble" as that has come to be a term of art.

From 1981 through 1989, median home prices increased about 7% annually. They slumped to 1.4% under Bush I, and 2.6% under Clinton until Q1 1996. True, roughly tracking the economy, they jumped to 6.6% from Q1 96 to Q1 97, but then moderated to 4.0% from there to Q1 2001.

After a big jump until Q 1 02, followed by a small decline the following year, the huge sustained jump was an increase of almost 48% between Q1 2003 and Q1 2007. As bubble-level increases, the last 5 years of the Clinton period, which seemed to a great extent economy-driven, don't seem in the same league as the latter period -- especially considering the fact that the economic recovery of the Bush period was a lot weaker.

Unlike the Clinton-era price increases, which seemed to be a product of a general economic euphoria, the 2003-07 period was a pure real estate bubble that itself fed and sustained whatever economic recovery there was. That seems to me to be a huge difference.

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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.