Question: Given your predictions, why did you just buy that house?
Answer: I will simply say that I had an inside track and got a very good deal. This is kind of a long-run holding. Do we have a real estate bubble? Yes. On the other hand, I'm covered because I sold a place and I bought this place. So in a sense I took my ill-gotten gains on one house and rolled it into a new place. I'm also well within my income level; I can afford it. So if the price doesn't appreciate for six or seven years, it doesn't matter to me. And that's the key point.
Q: So you're not advising homeowners to stay out of the market because you believe there's a bubble?
A: People need to understand that we have gone through an environment where property prices have appreciated at a strong rate and now they are not going to appreciate for a while. We've gotten 10 years of appreciation in three years. If you're in a good place financially and you're not having problems, then don't worry about the bubble. The problem is people buying for the first time, buying second homes or buying property they can't really afford on the belief that appreciation is going to bail them out. And that's what's dangerous.
Q: So what got you started in economics?
A: I studied business at (the State University of New York, Buffalo) and came out here for graduate school. I came to UCLA to get a Ph.D. in management. You ask "What the hell is a PhD in management?" It all depends on whom you study under. I was studying under Ed Leamer at the UCLA Anderson School and on the first day I said "Hi Ed, I'm here to do a Ph.D. in management with some emphasis in business economics" and he said 'Great. See that building over there? That's the economics department. Take all your classes over there.' So for all intents and purposes I got an economics Ph.D.
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