In the long run, outsourcing is another form of trade that benefits the U.S. economy by giving us cheaper ways to do things.

The bottom line for housing is that the concerns we used to hear about the possibility of a devastating collapse—one that might be big enough to cause a recession in the U.S. economy—while not fully allayed have diminished. Moreover, while the future for housing activity remains uncertain, I think there is a reasonable chance that housing is in the process of stabilizing, which would mean that it would put a considerably smaller drag on the economy going forward.

Are deviations from full employment a social problem? Obviously.

The lower half of households by wealth held just 3% of wealth in 1989 and only 1% in 2013.

The average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013. About one-fourth of these families reported zero wealth or negative net worth, and a significant fraction of those said they were "underwater" on their home mortgages, owing more than the value of the home. This $11,000 average is 50 percent lower than the average wealth of the lower half of families in 1989, adjusted for inflation.

Productivity growth, however it occurs, has a disruptive side to it. In the short term, most things that contribute to productivity growth are very painful.

One common way of judging whether housing's price is in line with its fundamental value is to consider the ratio of housing prices to rents. This is analogous to the ratio of prices to dividends for stocks.