Home sales plunged this summer despite low-interest rates, tax credits, and other government efforts to jumpstart the market, rekindling fears that the housing market still hasn't hit bottom. Some economists are even advising that the Obama administration step out of the way and let home prices crash, so the recovery can begin. Is there still a housing bubble?
It's mostly deflated: If housing were a staple, like food, prices would have much farther to fall, says David Leonhardt in The New York Times, because they would have to fall back to where they were before the bubble, adjusting for inflation. But Americans really treat houses like luxury goods, spending more as they earn more. Incomes rise faster than inflation, so prices are no longer "terribly overvalued."
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