Dean Baker
Dean Baker
Dean Bakeris an American macroeconomist and co-founder of the Center for Economic and Policy Research, with Mark Weisbrot. He has been a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D. in economics from the University of Michigan...
housing leading leaving money mortgage predict prices rule secondary surprise
I wouldn't necessarily predict this would be a trigger, but I wouldn't rule it out either. It wouldn't surprise me if you see money leaving the secondary mortgage market, leading housing prices to fall.
banking betting continue housing lose market people run turning unexpected
People are really stretched. They are banking on everything turning out right for them. That they won't lose their jobs, that they won't run into unexpected expenses. They're betting that the housing market will continue to appreciate.
behind current element housing large
There is a large psychological element behind current housing prices,
bubble housing promoted
He consciously promoted the housing bubble as a way of boosting the economy.
affect bubbles far housing interest jump market maybe psychology rates seen shift starts stay stories until
Until the psychology starts to shift or interest rates jump up, the market will probably stay strong, ... So far we haven't seen that. We've had a lot of stories on housing bubbles lately. Maybe that will affect the psychology.
bubble comparable dangers economy faces greater housing levels market stock today
With the housing bubble now having generated comparable levels of unsustainable wealth, the economy faces even greater dangers today than it did when the stock market crashed.
drag housing question slow
Clearly, housing is going to be a drag on the economy; the question is how much does housing slow and how quickly.
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Normally when you talk about housing bubbles bursting, you're talking about a specific local market. But we've never had a nationwide run-up in home prices like this. I don't think it's realistic to think the decline won't also be national. I think a 15 percent nationwide decline is very plausible. In many bubble areas, could be looking at 20-25, maybe 30 percent declines.
home prices run
There has never been a run up in home prices like this.
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The problem is that few people recognize it for the gamble that it is.
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The optimistic scenario gives you about 2 million jobs next year -- about 180,000 a month. If I had to make my best bet, I'd say we'll have level home prices and growth of about 1.5 percent for the year. There'll be job creation of about 80,000 or 90,000 a month.
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Builders will keep building as long as they can keep getting these prices. But I think there's a glut developing clearly in some markets and that clearly will put downward pressure on prices.
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Let's imagine rates go to 7 percent, I think that would take the air out of the bubble pretty quickly,
borrowing gas led money people pull willing
It does pull a lot of money out of people's pockets. Even if it doesn't go back up much, it translates to a 50-to-60-cents-a-gallon gas tax. But for the borrowing that people were willing to do, it probably would have led to recession.