Yale econ professor Robert Shiller had an op-ed in the Times this weekend that talked about why there’s not necessarily an end in sight for the decline in the country’s housing market. The piece examines why other declines have dragged out for years: “Despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline…Several factors can explain the snail-like behavior of the real estate market. An important one is that sales of existing homes are mainly by people who are planning to buy other homes. So even if sellers think that home prices are in decline, most have no reason to hurry because they are not really leaving the market. Furthermore, few homeowners consider exiting the housing market for purely speculative reasons. First, many owners don’t have a speculator’s sense of urgency. And they don’t like shifting from being owners to renters, a process entailing lifestyle changes that can take years to effect.” He concludes: “Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.”
Why Home Prices May Keep Falling [NY Times]


What's Your Take? Leave a Comment

  1. Real estate prices will keep falling simply because there is still no rational correlation between mortgage payments and hypothetical rent on a similar property.

    Plus the economy sucks and only rich people can get loans . . .

  2. Congrats lechacal on the rental – sounds great. Was too busy today to participate too. Wasder, I agree with all your points made today here on other threads. I think this article, and the drying up of parents’ help in other article discussed here today, bolster my bets of continued declines. Beyond the Williamsburg hipsters, we’ve noticed plenty of people in other neighborhoods benefiting from parents’ largesse to buy that property, pre-crash, and now that kind of parental help is much harder to come by given stock market declines since last year. The NYT “honk if the end is near” article, however, was just plain silly.