A graph we often trot out is the standardised price-income / price-rent data.

More or less, we aren’t worried about a 2006 US style housing event occurring again in the US, or, to a lesser extent, in the EU.

But we are worried for NZ and Australia.

Perhaps this is the wrong lens. Perhaps P-I or P-R ratios don’t matter at all, for house prices, or, for economic events related to them.

In which case, you wouldn’t be worried. After all, such a model would have steered you wrong since 2012. That’s pretty problematic, for a model.

And ultimately, we just aren’t sure how to think about it. Scott Sumner argues persuasively that there are no bubbles. Dean Baker argues persuasively that there are some bubbles. You can insert the name of your favourite academic, and express their view.

In the end, we choose. We think it matters, and allocate with it in mind.

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