Robert Shiller, Yale University professor and the “Shiller” in the S&P Case-Shiller Home Price Index, discusses whether the housing market has already hit the bottom: “It could turnaround but I don’t see any scientific way to be assured.”
Full video and transcript below:
well, it’s really hard to tell, because we’re just coming out of the biggest housing bubble in history. so we’re kind of in unchartedterritory. it could turn around, you know. it’s been going a long time. we’re seeing some good news now. starts, permits, confidence, the nahb housing index is strikingly up, though it’s still low, but it’s up. so it could turn around. i just don’t see any scientific way to be assured what it’s going to do. it could keep going down. this is your thing, robert. if you don’t know where housing prices are going to go, how could anybody else have any hope of forecasting it correctly. where is the end game here, robert? what needs to happen? does it have to do with fannie mae or freddie mac, or foreclosures? what needs to happen to turn things around? well, in terms of housing, wemight be at the end game. home prices are back to a normallevel. they could just stay here, and that would be all right.right? housing is very affordable. interest rates are down, prices are down to kind of a normal level. they haven’t overshot normal. so maybe in terms of housing, this is it. this is it. and maybe nothing exciting will happen. maybe they’ll drift a littledown. this is normal? i’m smelling a little optimism from robert shiler on housing. did you just say this may be the bottom? it might be, yeah. because i’m particularly interested in leadingindicators, like permits. or the nahb traffic index which asks builders to assess the traffic of prospective home buyers. and that’s up a lot. these things can turn quickly and sharply. it’s too soon to tell. and confidence is everything. you’ve studied that with equity prices, right? things are better. people feel better.the economy is better. if — when housing turns, how quickly can it turn? well, see, it depends on whether real animal spirits come back. it could languish for 20 years. it could just stay where it is. maybe it’s coming back, but i don’t see any clear signs of that. there’s no reason why we have to have another boom soon. we might. but there’s no reason. and we’ve been kind of shocked. we went through a depression scare. so it could be 20 years before we have another boom. for the nation.whatto what extent can the overall economy improve, gdp show marked improvement without the participation of housing? well, i think that it will improve. we’ll have a reallocation into other things. for example, into other kinds of construction, apartmentconstruction. we need highways fixed. the infrastructure could get involved in that. but all kinds of other things will gradually come back. and we’ll be back to a normal rate of unemployment. that’s where we’re trending slowly. i like to hear a little bit — not a boom optimism, but a little bit of optimism, ithink, from pro feller robert shiller. my high gas prices, i’m sorryto rain on this homium — the love effect that herb and cramer just had. robert, might high gas prices force people to stay in urban spaces, not move out of the city, and therefore in alllikelihood rent more trap than perhaps buy? alan greenspan said, it’s not a national market. there’s all different areas. if gasoline prices go up, the suburbs will look less attractive, right? center city will look more attractive. and that’s more naturally a rental market. so rental apartments might takeprecedence. are we building more of them. it’s already starting to happen.