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Housing and Government Policy in the Global Economy: The Cases of Korea and the US

Working paper #509
Susan M. Wachter

For the past two decades, housing prices have surged through much of the developed world, and more recently these increases have accelerated. Sustained price increases of this sort across many economies in housing markets, which are local markets, are unusual. For the US, in particular, the recent gains represent a major paradigm shift. There has not been a previous period when housing price increases exceeded CPI gains for six years in a row in US history.

We also consider the price run up in Korea where prices have increased steadily at rates exceeding inflation for decades until the Asian financial crisis and they are once again increasing dramatically. While evidence suggests that prices are rising for housing across many nations, the magnitude of the increase varies considerably across countries and even within countries, across cities. We consider the sources of this run up in housing prices and possible government responses.

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