I wanted to talk about the real estate bubble, which is a favorite topic of mine. I should say, it's a depressing topic, but it's interesting like a disease. It's a disease of the economy. I don't like the bubble itself but I like to study things like this. So I think I told you before that when I wrote the second edition to my book, Irrational Exuberance. I wanted to find a long term, say 100 year, price series for homes. And I discovered there was none in any country. So I constructed one for the United States. And it attempts, it's not the average price of a home or median price of a home, which would be misleading because homes have gotten a lot bigger and better. It's the resale. It's a repeat sale index that looks at repeat sales of individual houses to measure price changes. This is the index that I produced with Carl Case at Wellesley College. And then my student, Alan Weiss here at Yale, wanted to start a company. So we started Case, Shiller, Weiss, published these indexes. So the blue line here is the home price index from 1890 to the present. I published it in 2005 when we were right here and I said in my 2005 edition, I said something is really going on right now which is unprecedented in US history. I said, well the only precedent is this one here the baby boom, yeah. After World War II, the war was over and the US wasn't damaged in the war. The soldiers came home. Now, what did they want to do? [LAUGH] Well, they had abatement. But by the way, during the war, they couldn't build any houses, by law except military housing or housing for factory workers. You had to get the work production board to approve any house. And you know what they approve? A tiny bungalow with one bedroom and that was it. You wanted two bedrooms, you have a baby now or you're hoping to have a baby. So there was a shortage of houses and they bid the prices up. But that was a totally different boom. That was understandable, right, World War II. Also, right around the peak, people started into a buying frenzy because of World War III, as they called it. The Korean War broke out in 1950, and I think I might have mention this before. People panicked thinking that they're going to shut down home building again. So I need my home now. But the funny thing is home prices didn't really fall after that, not very much. It wasn't the same thing. It was all about war and government restrictions on housing. This one was different, something was going on that was unprecedented. And I will tell you what it was. Probably, it was fraudulent mortgage lending. It was also not fraudulent mortgage lending, but it was overoptimistic mortgage lending. Somehow people thought that prices will go up forever. And just a bloom, just a bubble. You wonder why did it happen when it did? Well, it sort of happened on two prior occasions. This one here was a bubble in the 80s. And then it crashed with the savings and loan crisis. There was some fraud and manipulation in this bubble as well. This funding wasn't everywhere. It was in Texas first, then, it was in California and some East Coast cities so it didn't really catch on as big. And then this was another bubble the peaked in 1990. But then it really shot up. Like these were practice runs, trials runs [LAUGH] the idea spread everywhere in the United States. Not just in the United States, though, I might say. This was happening in lots of countries around the world. And it wasn't driven by building costs, population, or interest rates which weren't doing anything. So I think it was a speculative bubble that preceded and led to the financial crisis. Then, home prices really crashed. These are real home prices, by the way. Corrected for inflation until 2012, and then, they started going up again. Now, This series. I may have said this before. It showed no increase from 18, or virtually increase from 1890 until sometime in the 1990s. This is around 1997 when it started going up. So we had 100 years of no home price increase. This is important to understand, because it's contrary to most people's intuition. Most people would think, as the population grows and the economy grows, homes would just keep going up in price. Well, there is some truth to that, we have limited land, and people especially like to live in cities, established cities where they have jobs. So there's some truth to that. But offsetting that is that our technology for building homes is getting better and so we can mass produce things more. We can build them more efficiently so we don't need to do all the expensive things to maintain a home. You can see that building costs have not been up, in fact falling, for the last half century. The building cost might go up because of labor costs, but labor is only part of building. So it's kind of building costs are kind of stable. They've gone up a little bit In 100 some years, but not a lot. So if you can build them, there's no problem. And the price of land is actually a rather small component of home prices. At least, if you get outside of major cities. So you're building a structure, and structures depreciate and wear out and they go out of fashion. So people don't want them anymore. In fact, they will tear these houses down sometimes when they buy and put up a completely new house. So home prices don't tend to go up. But somehow in this period in the 1990s and the early 2000s, home prices were just seen as always going up. It had something to do with the I don't know the culture with the story about the emerging world. About the rich Chinese or rich Russians or whatever they are coming in and buying out properties they just got exaggerated and so it lead to a bubble.