Robert Shiller, a professor of economics at Yale University and co-founder of S&P/Case-Shiller Home Price Indices said there is a little bubble in the housing market in San Francisco.
Shiller said, “It’s getting a little bit bubbly” in San Francisco during an interview with CNBC wherein he discussed that continued sluggish of home prices in the country although the prices of homes climbed 0.76% in October, higher than the consensus expectations of the Wall Street.
Shiller thinks speculative bias maybe one reason behind big home price increases in San Francisco.
The S&P/Case Shiller index showed that home prices across the country continues to decelerate in October except in eight cities that experience faster growth. Shiller expressed worry about the fast acceleration of home prices in certain markets.
Home prices in Miami and San Francisco experienced that fastest growth in home prices with 9.5% and 9.1% year-over year. San Francisco and Tampa recorded highest month-over-month gains in home prices at 0.8% last October.
Shiller noted that there is a pattern when it comes to the growth of home prices in Miami and San Francisco. He said, “There’s a pattern here, I think. It is glamour city, beautiful places that have been the most bubbly in the past.”
He added that he doesn’t know the reason behind the big increases of home prices in both cities, but he suspected that it has something to do with speculative bias.
In addition, low interest rates also helped boost home prices, but he expressed that he felt a bit of anxiety regarding the housing market citing the reason about the latest increases. He believes that the market is a little fragile.
Shiller said expectations for housing market were often wrong
Shiller noted that the expectations for home prices have been positive over the past ten years. However, Shiller emphasized that the expectations for the housing market were often “very wrong.”
When asked if the weak home sales in November will recover in December, Shiller said the housing market is on-track with expectation, but he reiterated that it is fragile.
Meanwhile, David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices said, “After a long period when home prices rose, but at a slower pace with each passing month, we are seeing hints that prices could end 2014 on a strong note and accelerate into 2015.”
He noted that most of the national economic statistics other than those data related to the housing market were positive in November and early in December. The Department of Commerce revised its GDP growth rate to 5% for the third quarter. The unemployment rate in the United States last November was 5.8%. The sales of existing homes declined 6.1% and new home dropped 1.6% in November.