Lacker, Jeffrey

Some observers have called this extraordinary behavior of the housing market in recent years a bubble. I don’t find that term useful or particularly accurate, since the behavior of housing appears to have been based on solid fundamentals. 

First, there were good reasons for the homeownership rate to rise and for homeowners to spend more on housing...People base their investment plans on current and anticipated income growth, and it is not surprising that households would move increasingly from renting to buying their own home.

Second, inflation fell to below 2 percent in the mid-1990s, and over time, financial market participants became more confident that inflation would remain low and stable; that confidence, in turn, led to low mortgage interest rates.