There's no such thing as regulation without too much of "the wrong kind".

Where are house prices rising?

I referred to the article by Luskin that Don linked earlier. Luskin claims, "According to the latest report from the National Association of Realtors, the median price of an existing home is up 8.5 percent from the low of last February. And according to the U.S. Census Bureau, the median price of a new home is up 1.3 percent from the low of last December."

The Case-Shiller Composite-20 index was still falling in June (the most recent figures I've seen), but it was falling more slowly than in Q4 '07 and Q1 '08. The index in June is still above its level in June '04 and nearly 60% above the level in June '00. A 60% rise over eight years is hardly a housing collapse.

9 of the 20 city indices, including New York, were up May to June, but I wouldn't be surprised to hear that the N.Y. index is falling rapidly now, because financial services are the center of the storm.

I wish you the best of luck, but those of us outside of Manhattan and similar environs don't see the stratospheric heights of asset inflation, so we don't cry loudly when your prices collapse either. The price of my house has never been up nearly 60% since 2000. The C-S index for N.Y. was still up over 90% since 2000 in June of this year, after falling for two years.

If you have Excel, you can download the Case-Shiller index from S&P here.

Where are house prices rising? I live in Manhattan and the market has just now turned south. And that is before half of the people I know were just/are in the process of getting laid off. There is a long way to the bottom still.

With out these "free market" changes I'm not convinced this bubble or collapse would have occurred.

These complex products are built on a similarly complex, legalistic framework of forcible proprieties, and state agencies like the Peoples Bank of China bought a large proportion of the dubiously priced mortgage backed securities, so the "freedom" of it all is debatable.

Tulip bulbs happen. I don't see how the recent run up in house prices is "not a bubble" unless we simply define "bubbles" out of existence. The downside is not therefore as steep as the upside, because the housing market is the leading edge of an inflationary expansion practically designed into our monetary system. We're now in a phase in which house prices correct a bit while other prices catch up, so house prices and more general prices meet somewhere in the middle. House prices are now rising as commodity prices fall, so we're still bouncing around the new equilibrium. Wages must catch up as well.

Too much of the wrong type of regulation.

See Tyler Cowens column:
http://www.nytimes.com/2008/09/14/business/14view.html?_r=3&ref=business&oref=slogin&oref=slogin&oref=slogin

In a free market there would be no Federal Reserve to skew the price signals; there would be no Fannie or Freddie to support mortgages at below-market-rates. If Bear
Stearns made bad investments or malinvestments, it would go broke as it should.

The problem is not a lack of goovernment intervention, it is too much government intervention. It is also a lack of meaningful regulation by free market forces.

Will we ever learn?

Travis

I'm left, however, still not feeling very convinced we have an answer. The one thing that seems to have changed after steady and stable growth of home ownership for 30 years is a relative deregulation of the involved industries and a boom in new complex financial products. With out these "free market" changes I'm not convinced this bubble or collapse would have occurred. The free market designed these products to supposedly decrease risk when in fact these products were specifically made to be opaque as was the reason for requesting "hands off" from oversight. The market and it's experts failed miserably at its job of decreasing risk and allocating capital and of offering secure investment products to main-street America.

The solutions offered in the discourse seemed very superficial. And the concern that this issue might cause a resurgence of regulation seems paradoxical to me considering the historical facts and outcomes… I mean look at the home ownership graph I gave above.

Why can't we just go back to the good old days when banks made loans backed by the government and held primary responsibility for them and investors used their own capital to push whatever products they wanted clear of any ties to the treasury? What seems to have happened here is that the wall between banks annd investors broke down, too big to fail monopolies resulted and now had unlimited governmental credit and insurance to play with and even friendly insiders in the Fed and credit agencies to help build their pyramid scheme.

Ideas for solutions like, "Index allows wise people to make money and not so wise people to take risks or lose money." already seems complicated to me. I don't think I'm one of those wise people you are talking about who might benefit from more complicated products and more "economic democracy". Let the free market system run side by side with a government system then just let people know which is which then they will have all the knowledge they need to decide what side they want to put their money into.