Home Economics Robert Shiller: Puzzling HousingOutpacing Expectations

Robert Shiller: Puzzling HousingOutpacing Expectations

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Robert Shiller, Case-Shiller Index co-founder and Yale University professor of economics, discusses the latest housing data and home prices. Shiller says the market is going up faster than people perceive it and expectations are not very high for home price increases.

Robert Shiller interview below

course, great to see you. good morning. it is the smallest in two years. a lot of people wonder if we’ll see reacceleration before it’s time for the fed to start hiking. well, yeah, it’s still, by the way, going up at over 10% for the last year, so i think that this may continue — i really don’t know. but there’s been a lot of momentum, upomentum, and i’m not sure that’s gone. people are digesting the numbers for existing yesterday, and, i mean, unless your home sells for a million dollars or more, professor, you’re down for year over year. what do you think of the dynamic and is it a function of people holding large assets being the winners, and those who do not are not fairing nearly as well? well, i’m not sure what theory your parting to, but what i see at this point in the market is that the market is going up faster than people perceive it. it’s actually a better market than people think, and expectations are not really very high yet for home price increases. the survey that came out earlier this year shows that people really are not expecting a lot, and so somehow it’s a puzzle. the market is outpacing expectations. i’m looking at the number today, professor shiller, should we take this as a good sign home prices are not spiking because what we’ve seen are stumbles with home sales this year. it’s not about the weather, but as has been reported, higher prices, slightly higher mortgage rates. now mortgage rates are down. do we want to see moderation here in the pace of price increases? well, personally, i think that prices are more or less okay where they are. they went up way too high in 2006. we’re — they came down, like, 50%, and now they are going up. they look about right. you know, i hope people just don’t get so worked up about them. think about other things in life. there’s no reason to expect any huge movement. they are going up a lot. it’s slowing down. yeah. you know. let me take you to what i think is really interesting, the sun belt cities. you pointed out in your press release, rising at 30% a year. they’ve now come down to price increases of about 20%, vegas, l.a., phoenix, san diego, and san francisco. this se, to me, logical. the volume of sales are rising. when the volume of what is going through the market rises, you’re going to get better pricing, aren’t you? more realistic pricing? that’s the nature of the market that is normalizing, surely. yeah, i wish people understood that better. most people do not understand basic economics and the importance of supply. you mentioned sun belt cities. these are the cities with very high expectations. both vegas — san francisco has the highest — according to the survey, the highest expectations in the country. and i guess they think that the supply response can’t be as big because they are bottled up. somehow they have a bubble mentality.

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