Tuesday, June 22, 2010

Flashback: Housing bubble — or bunk?

Here's some interesting reading from five years ago today.

5 comments:

  1. This is a classic example of the thought process that cause so many economic problems:
    "Freddie Mac's analysis of single-family houses over the last half century hasn't shown a single year when the national average housing price has gone down. "
    So since something hasn't happened in a few decades its not going to happen. And the fact the the ecnomic situation, particularly in housing, was historically unprecedented does not matter. Its the same thing that made so many financial models completely worthless. They looked at historical data without noticing that conditions had changed dramitically making the historical data non-applicable.

    On the flip side, Baker's quote is "We've never seen this sort of run-up in home prices in U.S. history. In the past, home prices have always moved pretty much at the same rate with inflation's overall rate. But in the last seven years, they've outpaced the rate of inflation by 60 percentage points. ". Or in other words, don't talk to me about what has happened in the past without incorporating the fact on the ground in the present.

    But of course, no one could have seen it coming because its impossible to identify a bubble when its happening. Greenspan told me so.

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  2. RealisticOptimistJune 22, 2010 2:19 PM

    I love "experts." Like the previous comment stated - they analyze isolated statistics for the past 50 years and think they can predict the future. When my idiot neighbor used to say "house prices never go down," it wouldn't bother me because he doesn't know any better. When economic "experts" said it, it drove me insane. The same way it drives me nuts listening to these same people talk about an economic recovery.

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