If there were ever a case where a picture said a thousand words it’s this chart produced by
Yale University economist
Robert J. Shiller.
Shiller is probably best know for his accurate prediction of the 2000 stock market crash made in his famed book “
Irrational Exuberance”.
Now he has revised the book and produced a second edition that specifically addresses the current housing bubble.
This chart seems to say it all, real home prices, building costs, and long term interest rates all have remained relatively flat between 1890 and the mid 1990s while population grew at a regular pace. Then, inexplicably, there is a significant run-up in home prices.
What could explain this increase?
