By Christopher Matthews – Housing and jobs: these are the two keys to the economic recovery really taking off, and while we’ve gotten some positive news on the jobs front recently, real estate prices have more or less continued to decline steadily since their peak in 2007. Housing represents a huge portion of yearly GDP, but more than that it is most consumers main source of wealth. If home prices are rising, so are American’s net worth, and increased wealth will usually lead to increased confidence and spending.
The mechanics of the housing bubble: According Barry Ritholtz, after bubbles pop they usually fall a long way:
“Regardless of the asset class — stocks, bonds, commodities, houses, etc. — assets do not merely stabilize. We have never seen a stock market run up into bubble territory and then revert to fair value. Instead, we careen wildly past that level, to deeply undersold and exceedingly cheap.”
Related articles
- Will House Prices Drop Further? – PRAGCAP (woodonfire.wordpress.com)
- Housing Market Crashing in U.S. Metro Areas (wealthwire.com)
- Conditioning the housing market to unsustainable policies – DrHousingBubble (woodonfire.wordpress.com)
- Spring brings signs of hope and renewal – except in the housing market (ritholtz.com)
- Homeownership rate hits 15-year low, Peter Schroeder, Hill
