But Dean Baker, the co-director of the Center for Economic and Policy Research and a leading proponent of the theory that there has been a bubble in housing prices, says that he believes it could take five to seven years before prices get back to their highs on a nominal basis.
If prices are adjusted for inflation, he thinks that prices will never recover their recent highs.
“If you look at historical data, home prices have stayed pretty much flat in real terms, maybe being a few percentage above inflation or income,” he said. “That’s why the run-up in prices the past eight years was so peculiar. And the run-up is what created the bubble.”
Prices will never recover their recent highs when adjusted for inflation. Sounds like like Nasdaq 5000 doesn’t it. You will probably see the most severe nominal price drops late 2007 into 2008, then the forces of time and inflation will bring the market back to equilibrium. Common Sense dictates there is enough here to send the economy into recession. There is a legitimate debate on the degree (mild or severe?). This whole thing has thrown a wrench into a fiscal conservative’s-like me life. But it is what it is.
