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...
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I've always thought you'll have the movement in price before you'll see it on quantity side, ... As long as the price remains high, if you're a builder, you want to get the houses up in order to cash in.
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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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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.
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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,
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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.
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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.
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People are always trying to explain the lack of questions as saying there's a consensus around monetary policy, but there's anything but a consensus on monetary policy. What upsets me more than anything is no one is asking serious questions.
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It could be a very big hit. I'd say there's a 10 to 15 percent chance of negative growth if we see a spike in interest rates, or a really big jump in energy prices.
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I think their intention is to get people who are loyal and that does raise problems. It's clear that they're looking at this as a sales position.
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There is a large psychological element behind current housing prices,
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Hawaii's home prices suffered in the 1990s because of economic trouble in Japan, ... If home prices in California reverse, it will have ripple effects.