Robert Samuelson pulled a Washington Post special, reporting that:
"Young buyers 'will be able to enter the housing market at bargain prices,' argues NAR [National Association of Realtors] economist Lawrence Yun. When home prices again rise, increases will parallel income gains, meaning that the relative burden of housing costs will remain roughly stable, Yun says."
Actually, home price increases do not "parallel income gains." They track the overall rate of inflation, as has been shown with a century of data compiled by Yale University Professor Robert Shiller.
Relying on the NAR for predictions on the housing market is the standard practice at the Washington Post. All through the build up of the housing bubble, its main source on the housing market was then NAR chief economist David Lereah, who was also the author of the 2006 best seller, Why the Real Estate Boom Will Not Bust and How You Can Profit From It.
Contrary to what Mr. Yun claims, homes are not now selling at bargain prices, in fact they must fall by roughly 10 percent more to return to their pre-bubble levels. If Samuelson had relied on a disinterested expert, he might know this.
Also it is remarkable to see Samuelson repeat uncritically that Yun "expects only modest increases in interest rates." In his columns, including this one, Samuelson has endlessly bombarded readers with tales of soaring budget deficits. If Samuelson is right about soaring deficits then he cannot possibly agree with Yun's assessment that interest rates will increase only modestly.
In other words, if Samuelson's deficit stories are right -- and he certainly spends plenty of time on them -- then interest rates will rise a great deal. Insofar as higher interest rates translate into lower house prices, the story from Samuelson's perspective should be that home ownership looks really really bad.
How can he get this one so completely wrong?
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