Are There Bubbles in the U.S. Housing Market?
Real estate analysts are hotly debating whether or not the U.S. housing market is in a bubble. A bubble would mean people are paying unrealistically high prices and a fall in those prices could devastate our economy. At one extreme is John Talbott, an investment banker whose 2004 book, The Coming Crash in the Housing Market, predicts that nationwide prices will fall by 20 percent or more. At the other extreme are investors such as Ed Wachenheim, who argues that housing is different from other markets and so won’t suffer a huge decline in value. In the middle are numerous analysts who think there is no national bubble but that prices may fall in “some communities.” Home prices are too high, says one writer, in only about twenty urban areas, mostly located in eight states. “The bad news is that those areas contain roughly half the housing wealth of the country.” The regions that are most frequently mentioned as having overpriced housing markets — such as San Jose and Boston — are the o
