09.04.2013 - Housing markets: Rationalising the ridiculous
How, in any sensible accounting, could a home that went for one price in 2004 and 2009 go for more than twice that price for a short time in between? The 2006 level looks absurd. And yet Phoenix home prices rose 23% in the year to January. Three more years like that (and home-price momentum only appears to be building) and values would be right back at bubble highs. Is another round of madness following directly on the heels of the last, or is something else going on? In a new NBER working paper, Edward Glaeser examines America's long history of property booms and busts and reckons that the assumption of irrationality actually fits the data rather poorly. Wild property price swings are more consistent with great uncertainty about the future...............................................Full Article: Source
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