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Home Publications Blogs Beat the Press The Washington Post Does Not Know Which Way Is Up: Housing Prices Fell in August

The Washington Post Does Not Know Which Way Is Up: Housing Prices Fell in August

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Wednesday, 27 October 2010 05:14

The Washington Post headlined an article on the release of the Case-Shiller 20-City house price index for August: "house prices up less than projected." Actually house prices fell by 0.2 percent in August, with prices dropping in 15 of the 20 cities in the index.

The reason that Post reported prices as rising is that it was referring to the year over year change. This measure focuses on old information. We already had data on 11 of the 12 months over the last year. The new information is the August data, which is clearly most relevant for the future direction of house prices.

The article also includes the strange comment that: "In addition to unemployment, concern over deteriorating property values may also be weighing on Americans' psyche." Falling house prices affect Americans' wealth, not just their psyche. As a result of the plunge in house prices since the partial collapse of the bubble, households have seen a decline of close to $6 trillion in their wealth. This means that they have less ability to spend.

It is also surprising to see that the Post believes that the August data was more negative than "projected." The paper should stop relying exclusively on experts who failed to see an $8 trillion housing bubble.

Comments (2)Add Comment
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written by izzatzo, October 27, 2010 7:20
Falling house prices affect Americans' wealth, not just their psyche. As a result of the plunge in house prices since the partial collapse of the bubble, households have seen a decline of close to $6 trillion in their wealth. This means that they have less ability to spend.


Unlike Baker, real economists understand that psyche and wealth translate represent the same economic effect. It's plain as day. House prices went down by $6T which made wealth holders poorer, but on the demand side was an exact offset that made house buyers more wealthy by $6T.

Aggregate demand did not decline due to a "housing bubble". It just shifted with the wealth transfer from existing house owners to new house buyers and owners. The demand is still there.

The real cause of the recession and unemployment has nothing to do with a so called "housing bubble", instead caused by out of control government spending and exploding debt that has killed private sector spending across the board, not just in housing.

Stupid liberals.
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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.

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