Tuesday, January 29, 2013

Housing markets: The return of the bubble? via The Economist

AMERICAN housing markets are at long last recovering from the epic bust that began in 2006. Sales, prices, and construction all seem to have reached a cyclical bottom. Some analysts reckon that a new boom and, possibly, bubble could be inflating, born of tight supply and low interest rates. Robert Shiller is sceptical, noting that while indicators are strengthening, there is little reason to think that short-run momentum must lead to a more sustained price boom. Karl Smith disagrees:

"Shiller and I agree that nothing drastically different occurred in the the economy from March to September. What I do think happened is that the housing market passed a critical point – similar to the notion of “tipping points”, popularized by Malcom Galdwell.

Prior to the Winter of 2011/2012, weakness in the housing market was creating conditions which fostered further weakness in the housing market. During that winter we crossed a point where conditions in the housing market were fostering increased strength in the housing market...

Read more...Housing markets: The return of the bubble? | The Economist

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