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!

Question:
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

soooo

...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

4 comments:

  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!

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

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  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!!!

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

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