Paul Krugman sends us to Calculated Risk's graph of the Case-Shiller house-price series:
and comments:
Barry Ritholtz tells us that the president of the Boston Fed is surprised that housing isn't recovering. This is truly bizarre. Like Calculated Risk, my working assumption throughout the housing boom and bust has been that history, if it doesn't repeat itself, at least rhymes: the rise in housing prices looked a lot like bubbles past, and we should expect the bubble's deflation to follow past patterns too. And that tells us that we should expect a prolonged, grinding decline in home prices, back to more or less their pre-bubble inflation-adjusted levels.
That strikes me as too pessimistic. The rise of Asia and the resulting demand by the rich and by governments for U.S. assets to hedge political risk is likely to keep savings glutting for decades. We aren't buiding more superhighways, there are no major transportation improvements on the horizon, America is filling up, andlso land-value gradients are on the rise. If the income distribution continues to erode, we will wind up with higher prices for scarce positional goods--chief among which is location, location, location.
My guess is that we will ultimately give back half of the doubling...
