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IPFS News Link • Economy - Economics USA

The NYT Editorial Board Flunks Housing And The Economy 101

•, Dean Baker, CEPR
 The NYT's editorial on housing policy makes it sound like it expects the Nasdaq to return to its 2000 peak of 5000. The NYT wants more action on housing in order to get prices to rise and boost the economy. There is so much that is wrong about this view, that is difficult to know where to begin.

At the most basic level, why on earth would we expect house prices to rise? Has the NYT still not noticed the housing bubble? There was no logic to the run-up in house prices over the years 1996-2006.

This run-up was a break from a 100 year history in which nationwide house prices had just tracked the overall rate of inflation. There was nothing in the fundamentals to support this run-up as was demonstrated by the fact that rents only slightly outpaced inflation in the first half of this period and not at all in the second half.