U.S. House Prices

Abstract

From homeowners counting their rising wealth, to real estate brokers and construction workers riding the boom, to would-be-homeowners worried about being priced out of the market, housing has become almost an obsession. In many locales, prices have been rising much faster than the general price level, rents, or incomes. To many observers, this smacks of a classic bubble: a situation where house prices have risen far beyond what fundamentals dictate, driven by home buyers willing to pay inflated prices simply because they anticipate unrealistically high appreciation in the future. The concern is that when the bubble bursts, the economic fallout will be severe. This article examines the validity of these fears.