Archived Blog Post: December 3, 2003

The housing market: "Fallacy number three is a favourite claim of Alan Greenspan, chairman of America's Federal Reserve. This is that price bubbles are less likely in housing than in the stockmarket because higher transaction costs discourage speculation. In fact, several studies have shown that both in theory and in practice bubbles are more likely in housing than in shares. A study by the IMF finds that a sharp rise in house prices is far more likely to be followed by a bust than is a share-price boom."