Paul Krugman on housing market outlook

According to the widely used Case-Shiller index, average U.S. home prices fell 17 percent over the past year. Yet we’re in the process of deflating a huge housing bubble, and housing prices probably still have a long way to fall.

Specifically, real home prices, that is, prices adjusted for inflation in the rest of the economy, went up more than 70 percent from 2000 to 2006. Since then they’ve come way down — but they’re still more than 30 percent above the 2000 level.

Should we expect prices to fall all the way back? Well, in the late 1980s, Los Angeles experienced a large localized housing bubble: real home prices rose about 50 percent before the bubble popped. Home prices then proceeded to fall by a quarter, which combined with ongoing inflation brought real housing prices right back to their prebubble level.

And here’s the thing: this process took more than five years — L.A. home prices didn’t bottom out until the mid-1990s. If the current housing slump runs on the same schedule, we won’t be seeing a recovery until 2011 or later.

所有跟帖： 

• He is saying 3 more years to bottom or before recovery -miat42- ♂ (0 bytes) () 07/18/2008 postreply 08:49:51

• This is where opportunities are. -worriedmom1- ♀ (402 bytes) () 07/18/2008 postreply 09:11:04

• Affordability depends on how credit market goes -worriedmom1- ♀ (420 bytes) () 07/18/2008 postreply 09:30:30

• L.A. area is filled with defense companies -都爱哈哈- ♀ (77 bytes) () 07/18/2008 postreply 09:33:31

• Should say: "LA WAS filled with..." Today's LA is different -miat42- ♂ (83 bytes) () 07/18/2008 postreply 09:37:24

• then excuse my english :) -都爱哈哈- ♀ (0 bytes) () 07/18/2008 postreply 09:43:16

• Understanding inflation and home price drop -miat42- ♂ (1419 bytes) () 07/18/2008 postreply 09:36:00

• 回复：Understanding inflation and home price drop -id-blocked- ♀ (187 bytes) () 07/18/2008 postreply 09:40:01

• He is a very well known Princeton Economist and NYT columnist -miat42- ♂ (0 bytes) () 07/18/2008 postreply 09:45:58

• 回复：He is a very well known Princeton Economist and NYT columnist -id-blocked- ♀ (104 bytes) () 07/18/2008 postreply 09:54:58

• What is "inflation"? -worriedmom1- ♀ (388 bytes) () 07/18/2008 postreply 09:43:55

• Inflation == Erosion of money's buying power -miat42- ♂ (214 bytes) () 07/18/2008 postreply 09:47:49

• 回复：Paul Krugman on housing market outlook -abyli- ♂ (315 bytes) () 07/20/2008 postreply 19:33:51