US Home Prices 250% Of Real Values: Economist
Princeton University economist and columnist for the NY Times, Paul Krugman, was open in his assessment of the US housing market while making a speech overseas. "Macro indicators suggest that the market is speculative mania. Day trading cannot be sustainable. There is a real bubble mentality in the US housing market,' Prof Krugman said, adding that prices of US housing were 250% of their real values."
"A fall in the housing market and investment would spur a US recession and lead to capital outflows. 'There would be a difficult contraction in the US economy. I think there is 50% chance for a major break in the situation in the US next year.'"
"Prof Krugman said the US economy was currently unsustainable, with the huge current account deficit and overinvestment in the housing market eventually leading to an economic recession and wiping out the US's role as 'the world's importer of last resort.'"