“As I talk with economists from countries whose housing values have risen markedly but not experienced sharp declines, I have been struck by two things. First, they are often confident that national (versus regional) house-price reductions are unlikely. And secondly, most assume that a decline in house prices would have a measured impact on the economy should that in fact occur. But the experience of Japan in recent decades and the U.S. more recently should provide some caution – given that the economic retrenchment that followed these significant declines in home values exceeded most people’s expectations.” /
“… sharp declines in housing prices can have additional negative effects, with broad implications for macroeconomic outcomes and monetary policy – broader, perhaps, than may be assumed and incorporated into most statistical models of the economy. …
(When) housing prices do fall the effect on the economy is often much greater than many people expect.
A key lesson from the past several years is that homes are not riskless investments.”
- excerpts from a speech given in Stockholm 28 Sep 2011, by Eric Rosengren, President of the Federal Reserve Bank of Boston.
[Taken from a recommended article by Ben Rabidoux, The Economic Analyst, 28 Sep 2011]
Housing is in a speculative mania in Vancouver and the unwinding of that bubble will have broad and deep negative effects on our economy and our society. – vreaa