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Joseph Stiglitz, Aaron Edlin, and J. Bradford DeLong

Print publication date: 2011

Print ISBN-13: 9780231143653

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231143653.001.0001

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The Menace of an Unchecked Housing Bubble

The Menace of an Unchecked Housing Bubble

(p.288) Chapter 34 The Menace of an Unchecked Housing Bubble
The Economists' Voice

Dean Baker

Columbia University Press

This chapter considers the US housing bubble. Over the last eight years, home prices have risen by almost 50 percent in real terms. The run-up has not been even. In large parts of the country (most of the South and Midwest) there has been little real appreciation in house prices. In contrast, the run-ups in the bubble areas (the West Coast, the East Coast north of Washington, DC, and Florida) have been close to 80 percent in real terms. There has been no change in long-term fundamentals to warrant the level of house prices today. What's more, the sooner the bubble is burst the better: delaying the economic pain will only make it worse. It further argues the Federal Reserve should ensure housing bubbles do not get out of hand. In most parts of the country, housing prices have fallen from their peaks—how far they fall remains to be seen.

Keywords:   U.S. housing market, real estate market, home prices, housing bubble

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