[PEN-L:33151] Re: housing bubble?

[Bill Lear <rael@xxxxxxxxxx>]

On Tuesday, December 17, 2002 at 08:27:59 (-0800) Devine, James writes:
>...
>Okay, my thought, about one "fundamental" which could be behind the bubblish
>data: one of the things that also happened is the widening gaps in the
>income and wealth distributions that has been sustained over the last 25 to
>30 years (with a temporary narrowing of the income gap during the late
>1990s). The people on the low end of the income and wealth distributions are
>more likely to be renters, while those on the top are more likely to be
>buyers, of housing. Because the supply of housing does not shift between
>rental units and to-be-purchased units very quickly, the resulting shift in
>the distribution of demand would lead to increasing gap between the rental
>and purchase price of housing.
>
>In this view, it's also quite possible that there's a bubble going on. But
>it does suggest that the situation is not as dire (in terms of bubble
>economics) as sometimes thought. It also suggests that the Bush program of
>cutting taxes for the rich (and, now, raising them for the poor) would have
>the effect of keeping the bubble from deflating, or at least from not
>popping. That it would also intensify injustice is also clear.
>
>any thoughts?

It appears to be a sound analysis.  Of course many elites will be glad
that inequality, a fundamental of the economy, is "improving".


Bill