Another article on the Housing Bubble O’ Doom

by Caleb Reading

Dean Baker at the Center for Economic Policy & Research […] has tracked national housing prices going back to 1951. Prices pretty much track the rate of inflation up until 1995. But since then, average prices on new and existing homes have soared more than 35 percentage points beyond the overall rate of inflation. Is that unusual? You bet it is.

This sudden increase has no plausible explanation other than a bubble, in my view. Part of the bubble’s expansion is explained by the enormous wealth the stock market generated in the late ’90s, which spilled over into real estate, as happened in Japan during the ’80s.