March 2006 update on the US real-estate bubble

Long-Term Perspectives on the Current Boom in Home Prices

Robert J. Shiller, Yale University, looks at over 100 years of data and asks the question every homeowner wants to know: what is the short-term and long-term prognosis for real estate values? The news isn't reassuring, but luckily risk markets are being developed to help people hedge or buy insurance against the risk that Shiller unveils.

Citation: Robert J. Shiller (2006) "Long-Term Perspectives on the Current Boom in Home Prices", The Economists' Voice: Vol. 3: No. 4, Article 4.
http://www.bepress.com/ev/vol3/iss4/art4

The Menace of an Unchecked Housing Bubble

Dean Baker, Center for Economic and Policy Research

An unprecedented run-up in the stock market propelled the U.S. economy in the late nineties and now an unprecedented run-up in house prices is propelling the current recovery. According to Dean Baker, like the stock bubble, the housing bubble will burst. Eventually, it must. When it does, the economy will be thrown into a severe recession, and tens of millions of homeowners, who never imagined that house prices could fall, likely will face serious hardships.

Citation: Dean Baker (2006) "The Menace of an Unchecked Housing Bubble", The Economists' Voice: Vol. 3: No. 4, Article 1.
http://www.bepress.com/ev/vol3/iss4/art1

Is there a real-estate bubble in the US? (released 3rd June 2005)

W.-X. Zhou and D. Sornette

We analyze the quarterly average sale prices of new houses sold in the USA as a whole, in the northeast, midwest, south, and west of the USA, in each of the 50 states and the District of Columbia of the USA, to determine whether they have grown faster-than-exponential which we take as the diagnostic of a bubble. We find that 22 states (mostly Northeast and West) exhibit clear-cut signatures of a fast growing bubble. From the analysis of the S&P 500 Home Index, we conclude that the turning point of the bubble will probably occur around mid-2006.

http://arxiv.org/abs/physics/0506027