Dean Baker and the handwaving BS on Housing

Did the Fed pop  a housing bubble?

The green line is the Case Schiller 20 city home price index.  Notice the 1/2 of the bubble in house prices occurred coincident with the Fed raising rates.  Clearly homes were under priced relative to demand.  According to FOMC transcripts, the rate hike was intended to equalize the high oil prices, the Fed did not even think it had a housing bubble in 2004. The blue line are the housing starts. These will be about six months delayed relative to mortgage rates because of pipeline delays in permits.  But the housing starts declined before the rate hike reached its peak, the Fed thus having long since stopped the housing bubble.

If you look at unemployment, you will find that unemployment continued to decline well after the housing starts declined.  Unemployment did not shoot up until the oil spike which resulted from the drop in rates, oil became mispriced again. Most of the carnage to home  owners likely came from the  US government encouraging home ownership among the poor  after prices were peaking.

Dean Baker is simply an incompetent who still thinks the US economy is an accounting identity.