Dean Baker
Dean Baker
Dean Bakeris an American macroeconomist and co-founder of the Center for Economic and Policy Research, with Mark Weisbrot. He has been a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D. in economics from the University of Michigan...
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People are really stretched. They are banking on everything turning out right for them. That they won't lose their jobs, that they won't run into unexpected expenses. They're betting that the housing market will continue to appreciate.
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With the housing bubble now having generated comparable levels of unsustainable wealth, the economy faces even greater dangers today than it did when the stock market crashed.
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Until the psychology starts to shift or interest rates jump up, the market will probably stay strong, ... So far we haven't seen that. We've had a lot of stories on housing bubbles lately. Maybe that will affect the psychology.
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He consciously promoted the housing bubble as a way of boosting the economy.
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I wouldn't necessarily predict this would be a trigger, but I wouldn't rule it out either. It wouldn't surprise me if you see money leaving the secondary mortgage market, leading housing prices to fall.
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Normally when you talk about housing bubbles bursting, you're talking about a specific local market. But we've never had a nationwide run-up in home prices like this. I don't think it's realistic to think the decline won't also be national. I think a 15 percent nationwide decline is very plausible. In many bubble areas, could be looking at 20-25, maybe 30 percent declines.
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Clearly, housing is going to be a drag on the economy; the question is how much does housing slow and how quickly.
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There is a large psychological element behind current housing prices,
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People are always trying to explain the lack of questions as saying there's a consensus around monetary policy, but there's anything but a consensus on monetary policy. What upsets me more than anything is no one is asking serious questions.
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We're building at a 2 million-a-year pace, which is more than demand, and we're going to keep building at that pace until home prices correct, ... It's already showing up in the rental market, oversupply is pushing down rental prices.
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It does pull a lot of money out of people's pockets. Even if it doesn't go back up much, it translates to a 50-to-60-cents-a-gallon gas tax. But for the borrowing that people were willing to do, it probably would have led to recession.
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The problem is that few people recognize it for the gamble that it is.
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WE WERE shocking today and were given a lesson in finishing as they had nine chances and took six of them.
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When you see it increasing quarter after quarter, there seems to be something going on here. We're building more homes than are being filled.