Your economics lesson

I came across a video taped guest lecture today from the Department of Economics at Humboldt State University that pretty well sums up the current situation. The guest lecturer was Dr. Christopher Thornberg from Beacon Economics. The lecture was given on the 30th November 2006.

» Real Estate Bubbles and California’s Economic Growth, Part 1
» Real Estate Bubbles and California’s Economic Growth, Part 2
» Real Estate Bubbles and California’s Economic Growth, Part 3

Shiller’s US real home price index dating back 100 years is quite well known. However Dr. Thornberg makes reference to Dutch economist named Piet M. A. Eichholtz who created the Herengracht Real Location Value Index dating back 400 years. While there was large booms and busts over the 4 centuries, in the long term house prices have never increased more than 0.1% per year. Every housing boom was always followed by decades of falls relative to inflation.

From the index, it appeared house prices were the most volatile in the 17th century when they recorded one of the biggest booms before crashing in the 1670’s. The 18th and 19th centuries were relatively quite compared to the booms and busts of the 20th century.