In the process of updating some older charts, I stumbled across this gem, and couldn't resist posting it. It shows the inflation-adjusted price of existing single-family homes, and very clearly depicts the "bubble" in housing prices which began around 1997 (when Clinton cut the capital gains tax on home appreciation), and the deflating of that bubble which is now complete, with prices having fallen fully 39%—in real terms—from their 2005 high.But maybe you think that prices will have to go all the way back to 1968 levels, in which case there is still another 20% decline waiting in the wings.
As a counter to that, I would note that mortgage rates today are lower than they were in 1968, and real personal incomes have increased 250% since then. Do housing prices really need to decline further? I seriously doubt it—prices are incredibly cheap by almost any measure you care to come up with. The bubble has popped, and it's time to think about how much it might inflate again.
Image: www.flickr.com
Source: USA Today
Berk: What happened after 2007? Professor Richard Roll said it well;
"Markets are forward-looking, and in 2007, global market participants began to notice a major sea change washing ashore in many countries. Reversing the trend of at least the previous decade, the private sector's fraction of GDP began to perceptibly decline relative to the public sector's fraction. This phenomenon was observable in Europe, Latin America, and North America—especially in the United States, where the public expenditure bailouts that began the Bush administration and continued into 2009 brought the largest deficits in US history. Other public sector plans, such as health care reform, promised to divert even more spending from the private sector to the public sector in the United States and elsewhere.
Shale gas could contribute $118 billion to the U.S. economy in the next four years
Natural gas from shale is expected to create 870,000 U.S. jobs and add $118 billion to the U.S. economy over the next four years, according to a new report by IHS Global Insight. It is also expected to contribute $933 billion in taxes over the next 25 years.Image: AP Images
A report by the American Chemistry Council estimates 25% growth in the shale gas industry could create over 400,000 jobs and contribute $4.4 billion in federal, state and local revenue.
But environmental groups like Food and Water Watch say these job estimates are way off-base. Referring to a Public Policy Institute of New York state study that said 500 shale gas wells in five counties could create 62,620 jobs, the Food and Water watch said to Bloomberg, that after correcting the job multiplier, the wells were expected to create only 6,656 jobs.
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