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The Run-up in Home Prices: A Bubble

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  • Dean Baker

Abstract

In the past seven years, home purchase prices have risen nearly thirty percentage points more than the rate of inflation. This run-up in housing prices has increased housing wealth by more than $2.6 trillion, compared to home prices' just keeping pace with inflation. The result is an average of more than $35,000 of additional wealth for each of the nation's 73.3 million homeowners. This paper examines whether the increase in home prices is grounded in fundamental economic factors, or whether it is simply a bubble, similar to the stock market bubble.

Suggested Citation

  • Dean Baker, 2002. "The Run-up in Home Prices: A Bubble," Challenge, Taylor & Francis Journals, vol. 45(6), pages 93-119.
  • Handle: RePEc:mes:challe:v:45:y:2002:i:6:p:93-119 DOI: 10.1080/05775132.2002.11034180
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    Cited by:

    1. Roy, Saktinil & Kemme, David M., 2012. "Causes of banking crises: Deregulation, credit booms and asset bubbles, then and now," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 270-294.
    2. Ryan Fox & Peter Tulip, 2014. "Is Housing Overvalued?," RBA Research Discussion Papers rdp2014-06, Reserve Bank of Australia.
    3. Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, pages 455-491.
    4. David M. Kemme & Saktinil Roy, 2012. "Did the Recent Housing Boom Signal the Global Financial Crisis?," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 999-1018, January.
    5. Gunther Tichy, 2010. "War die Finanzkrise vorhersehbar?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(4), pages 356-382, November.
    6. Mason Gaffney, 2011. "An Award for Calling the Crash," Econ Journal Watch, Econ Journal Watch, pages 185-192.
    7. Dean Baker, 2011. "The Origins and Severity of the Public Pension Crisis," CEPR Reports and Issue Briefs 2011-04, Center for Economic and Policy Research (CEPR).
    8. Kristopher S. Gerardi & Christopher L. Foote & Paul S. Willen, 2010. "Reasonable people did disagree : optimism and pessimism about the U.S. housing market before the crash," Public Policy Discussion Paper 10-5, Federal Reserve Bank of Boston.
    9. Michal Jurek & Pawel Marszalek, 2014. "Subprime mortgages and the MBSs in generating and transmitting the global financial crisis," Working papers wpaper40, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    10. Jonathan McCarthy & Richard W. Peach, 2005. "Is There a 'Bubble' in the Housing Market Now?," NFI Policy Briefs 2005-PB-01, Indiana State University, Scott College of Business, Networks Financial Institute.
    11. John T. Harvey, 2010. "Modeling financial crises: a schematic approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, pages 61-82.
    12. Dimitri B. Papadimitriou & Edward Chilcote & Gennaro Zezza, 2006. "Are Housing Prices, Household Debt, and Growth Sustainable?," Economics Strategic Analysis Archive sa_jan_06, Levy Economics Institute.
    13. Mark Weisbrot & Rebecca Ray & Jake Johnston & Jose Antonio Cordero, 2009. "IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries," CEPR Reports and Issue Briefs 2009-37, Center for Economic and Policy Research (CEPR).
    14. repec:ibn:ijefaa:v:9:y:2017:i:8:p:221-228 is not listed on IDEAS
    15. Dirk J. Bezemer, 2012. "Modelos contables y comprensión de la crisis financiera," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 47-76, January-J.
    16. Alan S. Blinder, 2014. "Federal Reserve Policy Before, During, and After the Fall," Book Chapters,in: Martin Neil Baily & John B. Taylor (ed.), Across the Great Divide: New Perspectives on the Financial Crisis, chapter 5 Hoover Institution, Stanford University.
    17. Bezemer, Dirk J, 2009. "“No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models," MPRA Paper 15892, University Library of Munich, Germany.
    18. Yefimov, Vladimir, 2011. "Дискурсивный Анализ В Экономике:Пересмотр Методологии И Истории Экономической Науки. Часть 1. Иная Методология Экономической Науки
      [Discourse analysis in economics: methodology and history of econo
      ," MPRA Paper 49157, University Library of Munich, Germany.
    19. Kate Sabatini & Christian E. Weller, 2007. "Changes in Homeowners’ Financial Security during the Recent Housing and Mortgage Boom," Working Papers wp125, Political Economy Research Institute, University of Massachusetts at Amherst.

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