Saturday, November 8, 2008

What didn't cause the housing bubble

Via EconLog: Two recent popular scapegoats are not responsible for the housing bubble:
Robert Shiller wrote,
Dramatic home price booms since the late 1990s have been in evidence in Australia, Canada, China, France, India, Ireland, Italy, Korea, Russia, Spain, the United Kingdom, and the United States, among other countries.
He has charts suggesting that the Netherlands and Norway experienced greater booms than the United States. In his book The Subprime Solution, he has a chart that shows London house prices rising faster than prices in Boston.

What makes this a difficult fact is that so many explanations of the house price boom are U.S.-specific. It is hard to argue that the Community Reinvestment Act or the repeal of Glass-Steagall are what account for the home price booms in Norway or Spain.

1 comment:

  1. What makes the housing bubble so disconcerting is the precise similarity between different places on earth. Take this example from Denmark:
    (They are not inflation adjusted and the price is in DKK pr. square meter)
    But notice the syncronity and similarity of shape!

    When will the drop stop? It might not be a drop as such; but a long whining petering out. What I don't believe is a reversal to long term trend. Simply because society and economy has changed.
    Industrial work will return to the USA; but not to the extend they left. The big infrastructure investments have been made. There is no serious war in sight (the Chinese will implode before they can become a serious threat) - not that the Al Qaida's will go away; but they are no japanese fleet of 1941.