Debt Deflation

[Brad DeLong]

>Jeff Downing wrote:
>
>>I can't recall if you covered this in Wall Street or not,
>>but I was wondering if history provides examples of
>>corresponding Market and Real Estate bubbles and the timing
>>of these events.  More attention has been given lately to
>>the American housing market and its febrile spike in
>>valuation: following Fisher's logic, wouldn't one expect to
>>soon see a glut of sellers looking to liquidate their
>>biggest asset, especially if their nest eggs had recently
>>been robbed?
>
>I don't know the housing market that well. It does generally behave 
>like other speculative markets, but prices are more obscure (there 
>aren't really any standard price indexes around, and it's hard to 
>compare a two-bedroom in the Silicon Valley to a four-bedroom in 
>suburban Omaha to a co-op in Manhattan) and houses themselves are 
>pretty illiquid. And people won't dump a house the way they'll dump 
>a stock that's down 40%, because they need somewhere to live. So 
>it's kinda similar but kinda different too.
>
>Doug

Bob Shiller says that in America nobody can ever face selling a house 
for less than 80% of the maximum they thought it was worth, so 
whenever housing prices in an area drop 20% below their previous 
peak, they stop dropping, and instead volume of transactions drops to 
near zero...

Brad DeLong