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Over at the Center for Economic Policy and Research, Dean Baker and Mark Weisbrot ran a contest whereby economists could write in to try to refute the argument that the coming housing bust is inevitable.

And...they have a winner! Read the essay, and then how they refute the winner's argument.

Here's a little blurb from Baker/Wiebrot's answer to the winning essay:

"The market is responding to the housing bubble exactly as economic theory would predict. New homes are being built at record rate, far faster than can be supported by population and income growth. At the moment, this has mostly affected the rental market, leading to record vacancy rates and falling rental prices. However, as home prices continue to rise, many potential homebuyers will opt to rent, especially when interest rates rise. And vacant rental units can be put up for sale. The end result will be a loss of $2 to $3 trillion in housing wealth, and a downturn that is even worse than the fallout from the stock market crash."

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