The Washington, D.C.-based Center for Economic and Policy Research is sponsoring an essay contest on “Why there is no housing bubble.” The winner will win $1,000.

In other words, prove the CEPR, which has been tooting the bubble theory for some time, wrong.

Here is what the CEPR experts say:

“There is no precedent for the nationwide run-up in home prices over the last eight years–35 percentage points in excess of inflation. Neither the great boom of the ’60s nor the demographic surge created by the baby boomers forming their own households in the ’70 and ’80s led to any substantial increase in home prices, adjusting for overall inflation.

“Economists who claim there is no housing bubble–that the run-up is explained by fundamentals–cite several factors: increasing population due to immigration, limited land supply, environmental restrictions on building and growing incomes. The problem with these explanations is that none of them is new to the bubble period. If these factors explain the current run-up in home prices, they should have also led to rising real home prices in prior decades, when many of the factors (e.g. rising incomes) would have played a larger role in pushing up home prices.

“Rental prices have not kept pace with home prices. The rate of inflation in rental prices is now slowing, and in some bubble areas (e.g., San Francisco and Seattle) rental prices are actually falling. No one has yet produced a remotely plausible explanation of how fundamental factors can lead to a run-up in home sale prices, but not in rental prices.

“Bubbles inevitably burst, and the cost of the bursting of the housing bubble, like the cost of the bursting of the stock bubble, will be enormous. It will destroy much of the savings of tens of millions of families and almost certainly throw the economy into a second recession.

“It took nothing more than simple arithmetic to recognize the existence of the stock bubble in 1998-2000…(Policy makers’ failure to recognize it) led millions to lose their retirement savings and was the immediate cause of the 2001 recession.

“Send your essay (absolute 750-word limit) on why there is no housing bubble to the Center for Economic and Policy Research ( The author of the most convincing essay will receive $1,000. (The best essay will receive the prize, even if none of the entries is very persuasive). The winning essay will also be posted on the Center for Economic and Policy Research’s Web site, along with a refutation of its argument. The deadline for the contest is March 31, 2004.”

Editor’s Note: Send a copy of your entry to, and we will publish a selection of them on Inman News.


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