Arnold Kling

Evidence for a Housing Bubble

Arnold Kling, Great Questions of Economics
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The Economist points out,

British house prices are up by over 20% on a year ago. American house prices have risen by more in real terms in the five years to mid-2002 than in any previous period since 1945. The truth is that house prices, like equities, cannot for long outpace the growth of nominal incomes.

It is amazing how much wisdom there is in the simple argument that it is difficult for any one sector to outgrow GDP for a long period of time.

Discussion Question. Why wouldn't all real estate prices, including commercial real estate, rise along with house prices?

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