Tuesday, August 18, 2009

Response from Professor Case! (Of the Case-Shiller Index)

Response from Professor Case @ Wellesley regarding Nami's question on my previous post:
Thanks, Professor!

wait, what about this in america, now? http://www.calculatedriskblog.com/2009/08/research-on-homeownership-rate-through.html
from homeowners to renters?
explain plz

Response from Professor Case:
In 1989, Greg Mankiw and David Weil wrote a paper called "the baby boom the baby bust and the housing market." It made a big splash because it said the housing market would collapse in the U.S. during the 90's. He found a very strong correlation between household formation and house prices. Since the baby boomers were housed and the baby bust meant fewer households would be formed, he called for a big bust. Needless to say he was wrong. The 1990's and 2000's saw the biggest boom ever. I wrote a paper called "Land Prices and House Prices in the United States" published in an NBER volume edited by Jim Poterba some years ago, taking issue with Mankiw's result. I am attaching a copy. The real issue is how long will the boomers stay in their houses? I suspect they will stay a long time. They also buy houses like we buy cars...many own more than one. Consumer confidence is also not a strong predictor of behavior. Look at pages 40-45....Finally they forgot immigration....in the 1990 census we discovered about 10 million folks that we didn't know we had.... I also wrote the attached paper fpr Brookings


...contrary to what you read, there may no be such a big housing market effect...Quigley and I also find that falling house prices don't lower spending

Karl E. "Chip" Case


  1. That's awesome that Prof. Case responded! I especially liked his point about the baby boomers having multiple homes. There is a lot of that going on. Just yesterday, I found out one of my friend's parents bought an extra house in AZ, just for the fun of it.

    PS: Love the new picture! It's actually you!

  2. i love asking questions and not understanding (or expecting to understand) the answers.

  3. nams, i e-mailed you papers to read from Prof. Case! so you can remember english while you're in korea. hahahaha. can't wait for you to come home!!!

  4. esther! hope you're nice and well in nyc! see you this weekend maybe !