To Believe or Not to Believe? That is the bubble question

In a blog post this week hosted at the New York Times Web site, "Freakonomics" co-author Stephen J. Dubner explores the housing bubble debate with commentary from economists and other experts.

The questions: "Is it finally time to believe in the housing bubble?" and "How much should the average American care?"

The post, "Freakonomics Quorum: Is it Time to Believe in the Housing Bubble," features "Irrational Exuberance" author and Yale University economist Robert Shiller, current and former economists for the National Association of Realtors trade group, New York real estate luminary Barbara Corcoran, economics professor Aviv Nevo of Northwestern University who has studied for-sale-by-owner vs. Realtor-assisted home sales, and Amir Korangy, editor of The Real Deal, a New York City real estate publication.

Shiller: "It is worth noting that the (Chicago Mercantile Exchange futures) market is predicting home price decreases between 3 percent and 8 percent for the next year. Should this matter to home buyers? Certainly. Buying a large house with a mortgage can be a devastating move if home prices fall by more than the down payment; all home equity could be wiped out."

Yun: "As to the bubble, quite a number of local markets have not seen any price decline. The 'correction' has been in home sales, mortgage lending, and new home construction, all of which are ... down significantly. Some bad lenders have gone bankrupt, and aggressive hedge funds are hurting as a result -- and I, for one, do not care. I believe that homeowners who are in it for the long term will do well."

Lereah: "For some post-boom metros like Las Vegas, Miami and Phoenix, double-digit price drops are not out of the question. There have been some local housing balloons that have popped, but no national balloons. If you purchased property in 2005 or 2006 in one of the 'booming' metros that have now gone bust, you care a great deal, because you have most likely lost equity in your property."

Corcoran: "There's a hell of a lot of noise out there right now that would scare anyone away from buying real estate. Not me. I'm yahoo-ing, low-bidding, and snatching up deals wherever I can find them."

Nevo: "Anyone considering buying or selling a home any time soon should care about future prices. If you are thinking of selling, you should wiat if you think prices are going to go up. If you are buying, you probably want to do so sooner, and maybe offer a higher price if you expect prices to rise."

Korangy: The concept of a national housing market is ultimately a false construct, there simply cannot be a national housing bubble. What Americans should worry about is the vast, across-the-board slowdown in residential property investment. House prices can start to decline, making it harder for people to refinance their loans and causing a negative impact on consumer spending. This is how recessions begin."

More bubble talk on the Inman Blog here.

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