Friday, January 28, 2005
Housing bubbly
Here is MarginalRevolution on Robert Schiller's new edition of Irrational Exuberance and house price bubbles.
Some writers have never met a bubble they didn't like. The allusion is to something that suddenly pops, meaning that prices go over a cliff.
Supply and demand suggest that this is unlikely but we are talking about asset prices that necessarily include a speculative component -- one that is subject to self-fulfilling prophecies and mood swings.
In that case, the high end of the housing market may be at some risk. But, absent a decent definition of high-end housing, we have very little to go on. Or to worry about. When multi-million dollar homes shed some of their value, the losers will not be those households with most of their wealth tied up in their homes.
