Houses of cards

David Barker_thumb.jpg

David Barker, adjunct professor at the GSB, has researched the frequency of the term “housing bubble” in the headlines or leads of major newspapers. Pointing to a steeply inclined graph during a lecture last week, Barker explained, “After bouncing around at a couple of mentions a year from 1988 to 2002, it’s just taken off, and now, boy, everyone is writing articles about it. By the way, most of the articles are saying this housing bubble is about to pop.” He and fellow speaker Michael Munley, MBA’05, a business economist at the Federal Reserve Bank of Chicago, believe recent concern over the housing market may be in part manufactured by the media.

Ninety-five curious University alumni packed into a basement auditorium at the Gleacher Center to hear Munley and Barker’s talk, “What Housing Bubble? Perspectives on the Shape of the Real Estate Market.” The economists offered cautious reassurance to homeowners and investors: “I don’t want you to think that I’m an ideological purist and that you can’t have a housing bubble because markets are perfect,” said Barker. “There have been times that asset markets have fallen apart. It does happen and it is worth thinking about and worrying about. The question is, is it going on now?”

Some local real-estate markets, he admitted, are out of whack—“when Florida cab drivers are talking to people about flipping condos,” it’s a sign that the converted-condo market in the Sunshine State might be inflated. The country’s strong marcroeconomic growth, good financing conditions, and ever real American dream, he and Manley argued, will sustain housing growth. Only a handful of what Barker referred to as “rogue economists” think otherwise. “However,” he offered, “if you still believe in a housing bubble, look for a decline in sales volume.” Historically, he explained, homeowners are reluctant to bail out on their sinking ship before a housing crash.

Meredith Meyer, ’06

Photo: Barker explains the bubble myth.

August 31, 2005