The Consumer Price Index for Rent of Primary Residence, compiled by the United States Bureau of Labor Statistics
and corrected for inflation, went up only 8 percent in 1997 to 2005, so unmet demand for housing services can’t explain the huge increase in real home prices.
Real home prices rose 75 percent from February 1997 to December 2005, according to the S&P/Case-Shiller
National Home Price Index, corrected for inflation by the Consumer Price Index.
But the explanations for what happened in housing are not, I think, to be found in the conventional data favored by economists
but rather in sociologically important narratives — like tales of getting rich through “flipping” houses and shares of initial public offerings — that constitute the shifting mentality of the era.
It doesn’t explain the 29 percent rise in real home prices since 2012 either,
because inflation-adjusted rents increased only 10 percent in that period.
These stories appear to have been broadly exciting to people who didn’t flip houses themselves but who appear to have begun to think
that stretching a little and buying a house with a large mortgage would make them wise investors.
How Tales of ‘Flippers’ Led to a Housing Bubble -
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There is still no consensus on why the last housing boom and bust happened.
principle,” meaning “other people’s money.” He wrote: “Your objective is to control as much real estate as possible
while using as little of your own capital as possible.” In other words, borrow as much as you can.
