Unlearned Lessons from the Housing Bubble

The current world economic crisis was substantially caused by the collapse of speculative bubbles in real estate (and stock) markets – bubbles that were made possible by widespread misunderstandings of the factors influencing prices. These misunderstandings have not been corrected, which means that the same kinds of speculative dislocations could recur.

NEW HAVEN – There is a lot of misunderstanding about home prices. Many people all over the world seem to have thought that since we are running out of land in a rapidly growing world economy, the prices of houses and apartments should increase at huge rates.