The Washington Post completely missed the housing bubble on the way up. Its main expert on the housing market was David Lereah, the chief economist of the National Association of Realtors and the author of the 2005 bestseller, Why the Housing Boom Will Not Bust and How You Can Profit From It. Remarkably, the Post still does not seem to have heard about the housing bubble. An article on the latest Case-Shiller data on house prices noted that the October index shows prices falling back to their 2004 level. The article blamed the decline on the recession. This would be like blaming the fall in the NASDAQ from its 5000 plus peak to its trough under 1200 on the recession in 2001. Obviously the recession was a factor in the decline in the NASDAQ just as the current recession is accelerating the decline in house prices, but the main story is that the housing bubble is in the process of deflating. The inflation-adjusted level of the Case-Shiller index is still considerably higher than its mid-90s level, which implies that prices still have some way to fall before getting back in line with long-term trends.
--Dean Baker
