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September 10, 2002

Housing Bubble Bust?

The continuing consumer spending through this recession has been the wonder of economists, but with housing prices continuing to soar and low interest rates allowing homeowners to cash out equity easily, it's not that surprising. But what if housing prices crash or even just flatten out?

This bearish analyst points out that since 1995, the increase in housing prices above inflation "has translated into an additional $2.7 trillion in housing wealth, more than $35,000 per average American home owner." Even if prices just flatten out or hold even with inflation, just pulling that much out of the economy for coming years could, in combination with the business retrenchment, mean serious damage to the economy.

Posted by Nathan at September 10, 2002 05:36 PM

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