Thursday, December 20, 2007

The scale of the housing bubble: good news for first-time home buyers

Krugman posts a persuasive chart:

Charting the housing bubble - Paul Krugman - Op-Ed Columnist - New York Times Blog

... the chart shows is that this decade we’ve had a national housing bubble that is somewhat bigger than the bubble in LA in the late 1980s — a bubble that was followed by a 20% drop in nominal home prices, and a 30% fall in real prices. In LA itself, and in a number of other metropolitan areas, the bubble has been on a scale completely unprecedented in modern experience...

I'd have liked to see a third line showing the bubble in a non-coastal market -- Minneapolis - Saint Paul would be a good example. The national line incorporates the coastal effect, so for comparison we need a non-coastal line.

The implications of the chart are a transient (real price) decline of more than 30% on the coasts and roughly a 20% decline in less super-heated areas.

It's a good time to be a first-time home buyer.

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