'Go-go days' of housing market over?
What can we expect going forward?
- Duration 5:18
- Date Aug 10, 2012
What can we expect going forward?
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For the nation's struggling housing market showing some signs of life -- talk bad about that a little bit this week.
-- some new report explaining to slowly rising sales and even rising home prices as well.
The average home price nationwide is now 100 in 81000.
Dollars just about that.
That's a 7% increase from this time last year so it is going up a little bet my next guest says.
While boosting housing will help the economy the go go days of the old housing boom.
Are not coming back anytime soon Austan Goolsbee as a professor of economics at the university of Chicago's.
-- Booth school of business he -- you know him as an of the top economic advisors of the president early on in the president's terms Austin what's a better job.
Being a professor advising the president.
Professor at Chicago's the greatest job on earth.
The other the other is a great experience yeah I've been anywhere you want a bit they've both -- -- -- -- seven jot these days are currently it's right where we talk a little bit about the economy he did -- go go days and housing.
-- over that so -- so what does the new housing market look like or what can we expect in the years to -- Well it's a super important question because we got lulled into a false sense.
Over the ten years from 1996.
That was totally different than any previous period in US history we went for.
Seven -- or so years before that house prices rose about 1% a year.
And over that ten years they've rose about twelve the 15%.
So we have a collapse that was a bubble we have a collapse now it's great news that we're turning it around.
But it's not going back to growing 1215%.
A year it's gonna go back most likely.
To what was the old underlying slow trend upward that houses are not primarily a big financial investment.
It's a slow steady.
Turtle interesting -- -- it so everybody needs to understand let's talk a little.
About that because it's been such a part of the American dream.
To buy a house mean when you think about the American dream what does that look like the white picket fence and having your family in a home and -- -- it being one of the biggest investments that most American families.
I can make -- have made in the past several years so.
It did that -- -- -- -- years to come out or is something shifting in the economy where the home for the family isn't the biggest investment in something fundamentally changes.
Well I think it's still going to be the biggest investment for for most families.
But we probably got share of people owning their own -- home.
Up a little higher than was sustainable you know -- at the peak of the boom so I think -- that's come down.
-- is gonna rebound a little houses are very affordable by most metrics now prices are down.
Interest rates are historically low if you can qualify for a mortgage.
It's a great time to -- But I think a little adjustment to not.
Not necessarily what is the American dream but an adjustment to where do we expect that overall economy to be getting its -- from.
In the 2000 people came from two things building houses and all the related industry -- that.
And consumption growing faster than was affordable faster then.
Net income was growing.
And those two things were not sustainable and so people should get out of their head.
That we're about to go back to what we were doing in 2005.
And that's why it's taken a long time to get out of this recession.
It's because we can't go back to doing what we're doing right before.
If any we have were I you mention reliving a lot and credit the credit crisis is a big part of this is you mention with the consumption.
I've been to your point where you have these prices it seem like they're affordable in the grand scheme of things -- of these low interest rates a lot of people can.
Capitalize on if they can qualify.
Some have suggested that you know this financial crisis with the housing crisis to begin with and safety fix the housing housing recovery really happens.
That everything else gets better the job market everything.
Do you agree with battered you think of the center of this crisis so something else and it it won't really happen that the housing market completely recovers.
I yes and no.
It and whether I agree with yes it's true but that content doing that doing things that are not very Smart so.
If you could go back to housing construction.
And house price growth of 15% a year there's no question that that would make people feel a lot better.
But you gotta be careful we're turning this -- -- there was an actual joke headline in the onion to restore prosperity nation demands new bubbled to invest it.
And that thing -- we can't do that that's not.
You going back to -- re inflating the bubble will definitely not work now you can still hang out and we had for many years.
Steady good job creation coming from construction.
Manufacturing related to -- to the housing sector you -- furniture carpet stuff like that.
But that's just not gonna be the outsized contribution that it had in the 2000 we -- -- -- more investment more exports more manufacturing stuff like that.
Austin and never heard you quote from the onion.
When you worked for the president and -- right up now I think hip -- good pitchers think -- line.
That's for sure where is the next level that's a good segment in the future in the future ought to -- our to have you back thanks for the time today object --