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Dean Baker called the housing bubble as early as 2002: http://www.cepr.net/index.php/reports/the-run-up-in-home-prices-is-it-real-or-is-it-another-bubble/ http

by gruseom 13y ago

Dean Baker called the housing bubble as early as 2002: http://www.cepr.net/index.php/reports/the-run-up-in-home-prices-is-it-real-or-is-it-another-bubble/ http://www.cepr.net/index.php/reports/the-run-up-in-home-pri... By 2004 he even sponsored a $1000 contest for whoever could make a good case that there wasn't a bubble: http://www.nytimes.com/2004/01/18/business/personal-business-diary-a-1000-prize-for-disagreeing.html http://www.nytimes.com/2004/01/18/business/personal-business...

clarky07 13y ago
That means he was at least partly if not mostly wrong. As far as markets go, you have to be right in both direction and timing. He was 4-5 years early, and frankly 2002 prices weren't that insane. Especially compared to 2006-2007 prices. He was really early, and if bet against housing at that point, he likely went bankrupt before the crash. That's really neither here nor there though. What's the famous saying, something to the effect of "economists have predicted 10 of the last 3 recessions". Somebody is always calling for a crash, and somebody is always calling for a bull market. After the fact you can always find someone who was right about it, but that doesn't mean they were right about the why, and it doesn't mean they are going to be right about the next thing.
- gruseom 13y ago
  That means he was at least partly if not mostly wrong. I don't agree. You'd have to look at his reasons for calling it the way he did. Your "betting" objection is a red herring. To identify a bubble does not require predicting exactly when it will pop.
  - clarky07 13y ago
    Look at my comment above. Prices weren't even close to bubble levels. They were lower than anything we've seen post crash. Also I was clearly not talking about "betting" but rather investing. It's just not useful for someone to say something is happening far before it actually is happening. Perhaps he could have said the conditions are right for a bubble to start in the near future. In which case the correct play would be to make a lot of money in housing in 2002. There was no bubble then though. http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...
- eli_gottlieb 13y ago
  >He was 4-5 years early, and frankly 2002 prices weren't that insane. Define "weren't that insane", please. Were they sane when compared with the incomes being leveraged to buy them? Compared with some shortage of supply that would naturally push prices up? Because the story I've heard is that the mid-late 2000s housing bubble was just the peak of a vast secular inflation in real-estate values that had little to no tie to the actual feasibility of housing purchases for real families, and was fuelled largely by speculative lending.
  - clarky07 13y ago
    Well, in 2002 the prices were not even remotely close to the peak, and they were lower than anything we've seen post crash to this point. I guess you could try to argue that we are still in a bubble, but I don't think most would agree. Now, suggesting things needed a correction in 2002 might have been reasonable, but it was bubble like yet. http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...

by gruseom 13y ago

clarky07 13y ago

That means he was at least partly if not mostly wrong. As far as markets go, you have to be right in both direction and timing. He was 4-5 years early, and frankly 2002 prices weren't that insane. Especially compared to 2006-2007 prices. He was really early, and if bet against housing at that point, he likely went bankrupt before the crash. That's really neither here nor there though. What's the famous saying, something to the effect of "economists have predicted 10 of the last 3 recessions". Somebody is always calling for a crash, and somebody is always calling for a bull market. After the fact you can always find someone who was right about it, but that doesn't mean they were right about the why, and it doesn't mean they are going to be right about the next thing.

gruseom 13y ago
That means he was at least partly if not mostly wrong. I don't agree. You'd have to look at his reasons for calling it the way he did. Your "betting" objection is a red herring. To identify a bubble does not require predicting exactly when it will pop.
- clarky07 13y ago
  Look at my comment above. Prices weren't even close to bubble levels. They were lower than anything we've seen post crash. Also I was clearly not talking about "betting" but rather investing. It's just not useful for someone to say something is happening far before it actually is happening. Perhaps he could have said the conditions are right for a bubble to start in the near future. In which case the correct play would be to make a lot of money in housing in 2002. There was no bubble then though. http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...
eli_gottlieb 13y ago
>He was 4-5 years early, and frankly 2002 prices weren't that insane. Define "weren't that insane", please. Were they sane when compared with the incomes being leveraged to buy them? Compared with some shortage of supply that would naturally push prices up? Because the story I've heard is that the mid-late 2000s housing bubble was just the peak of a vast secular inflation in real-estate values that had little to no tie to the actual feasibility of housing purchases for real families, and was fuelled largely by speculative lending.
- clarky07 13y ago
  Well, in 2002 the prices were not even remotely close to the peak, and they were lower than anything we've seen post crash to this point. I guess you could try to argue that we are still in a bubble, but I don't think most would agree. Now, suggesting things needed a correction in 2002 might have been reasonable, but it was bubble like yet. http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...