On the other hand, Shiller is guardedly optimistic

He sees bubble danger in areas where prices have recently zoomed (that’s not Greenwich) but doesn’t think continued high unemployment necessarily means prices will drop. I guess we’ll see.

U.S. home prices in August rose for the fourth straight month. The Standard & Poor’s/Case-Shiller composite index of home prices in 20 metropolitan areas rose 1.2 percent in August from July, topping the estimate of a 0.7 percent rise according to in a Reuters poll.

“The prominent fact that we are seeing with this data is that home prices are just zipping up,” Shiller said.

“It is entirely possible that even with the bad news we are getting, home prices could start a major increase,” he said.

Prices in the top 10 U.S. metropolitan areas gained 1.3 percent in August after a 1.7 percent rise the previous month, according to the S&P composite index.

Shiller said he does not agree with analysts who believe that rising unemployment will hurt home prices. The U.S. jobless rate reached a 26-year high of 9.8 percent in September.

“It is unlikely that we will have the major, colossal bubble we had a few years ago, but even in the Great Depression real home prices were rising with the unemployment rate above 12 percent,” he said. “Just because we have high unemployment does not mean the stock market cannot boom and the housing market cannot boom.

“What happens from here will depend on people’s animal spirits and speculative impulses,” Shiller said.


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2 responses to “On the other hand, Shiller is guardedly optimistic

  1. Anonymous

    Shiller: lack of job or cash doesn’t get in way of human greed and stupidity

  2. Buyer

    Equifax — the credit monitoring corp — just sent me the following email. Thought it might interest you:

    “The Latest on Today’s Housing Market

    Over the last several years, we’ve all heard the news reports of a consistent downward turn in the housing market. But is there a possibility that the market is beginning to look up? Several national studies show that real-estate values have increased this quarter over the first quarter of 2009 (Standard & Poor’s S&P/Case-Shiller U.S. National Home Price index). Find out what this trend means for potential homebuyers and existing homeowners!

    In August, the National Association of Realtors reported that the sales volume of existing homes had gone up 7.2% from the previous month. This month has also seen positive reports on home prices and affordability. Plus, with the sales of new homes hitting their highest level since last year at this time, it could certainly seem like the housing market is beginning to recover.

    A number of factors could be contributing to the improvement, including low mortgage rates, large price reduction in homes, the stimulus benefits (including the first-time homebuyer tax credit), and more. Additionally, there seems to be widespread recognition that home prices cannot continue falling forever, causing people to buy before the reduced-price window is closed.

    Some people are cautiously optimistic. While the Housing Market Index — a measure of builder confidence according to the National Association of Homebuilders and Wells Fargo — is the highest it’s been in a year, it only weighs in at a meager 18. Anything below a 50 is considered to be poor building conditions. Similarly, Robert Shiller, one of the primary authors of the Case-Shiller study, suggests that only time will tell if this improvement will last; a similar improvement was seen at the beginning of 2008 that was little more than a short-lived burst before market rates continued declining.

    Most signs, however, certainly point to an imminent improvement in the housing market. If you’re considering purchasing a house while you can take advantage of great deals, there are still some things to consider:

    Make sure your credit is in order. Early in your house hunting, you should know what credit history lenders are going to see about you, as well as how they will evaluate you. Lenders will typically look at your credit history as reflected on your credit report from all three major credit reporting agencies — along with your credit score — as part of the process of determining your creditworthiness. So, order your credit report and credit score early to check for any inaccuracies and understand your ability to negotiate with lenders.
    Don’t purchase if you’re not ready to stay put for a while. While the market may be improving, it’s going to be some time before it’s a seller’s market again. So don’t purchase a house if you think you may change your mind and want to sell it in the short-term. Plus, with all of the costs required in buying a house, you may actually lose money if you attempt to sell yours too soon.
    Choose a house within your budget. Establish your budget before you go house hunting in order to avoid falling in love with properties outside of your price range. A good affordability rule of thumb suggests you can manage to purchase a house that costs roughly 2.5 times your annual salary. Don’t forget to factor in additional expenses such as repairs and property taxes!
    While no one can say for sure that these changes will continue, it’s certainly a good time to be a homebuyer.”