The Unassuming Economist

From Marginal Revolution:

“Paul Krugman is coming very close to admitting a) “real estate bubble” was not the best formulation, and b) Kevin Erdmann was right.”

Tweets from Paul Krugman:

“Aha. An economic mystery solved, I think (with a suggestion from Charlie Steindel). I’ve been noting that we’re currently seeing a surge in real house prices up to 2000s-bubble levels 1/

But the 2000s bubble was geographically very uneven: prices surged in cities with strict zoning, but not in places where developers were free to sprawl => elastic housing supply. This time the price rise is across the board, in fact in some cases higher in sprawl areas 2/

Eg Atlanta v Boston, on a log scale so you can see proportional differences: Boston >> Atlanta last time, if anything Atlanta > Boston now 3/

What’s going on? The answer surely involves weak supply response 4/

And that in turn points to our old friend disrupted supply chains, which have made construction very expensive 5/

Suggests that prices may eventually fall in smaller/less zoned cities, once houses can be built in large numbers 6/”