Bob Shiller: 'Decline May Well Continue for Some Time'
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…
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]
joe, I sometimes try and act like one 🙂
Joe are you just back from a recent rip to Argentina?
wow, denton. I thought everyone on this blog was a young, disrespectful punk. thanks for the info.
I love krugman. he does have a habit of beginning his challenges with “um…” which maybe isn’t taken so well. But he has a genius for exposing right-wing nonsense for what it is, and putting difficult economic arguments into terms that people can understand. If you have ideological differences with him, you’re not gonna like him. In his defense, sam, he predicted the downturn correctly; it was long overdue when it finally came!
Actually, the cap gains thing was one of the reasons we sold our coop and bought a house. We pretty much maxed out the entire 500k, in fact we had to find a few assessments and stuff to stay under it.
Now we begin again at zero. Actually, based on a recent appraisal, we begin at about minus 200k. But it’s all good, we’re not over-leveraged, we’re 40% LTV, and we can wait. We’ve been in NYC 55 years and we’ll see the end of this mess just like we’ve seen the end of earlier messes. An investment in NYC real estate has always proven to be a good thing in the long term.
More from T2 (jun 1, 09):
“Our data shows that mid-to-upper end housing market on the precipice of the exact cliff that the market fell off of in 2007, led by new loan defaults (see post above). What happens to the economy whenyou hit the mid-to-upper end earners the same way the low-to-mid end was hit with the subprime
implosion? We will find out soon enough…”
DIBS, I won a lot of QOTD’s back when that semi-prestigious award was being handed out but I have never been the gloomy sort of anti-capitaliist the Norwegians seem to prefer for their Nobels.
There is something about Krugman that is deeply irritating. It’s not just that he seems to be always mistaken, it’s that he is mistaken in such an annoying way. He has been predicting collapse of the American economy since 1997, finally when a downturn actually hits he is hailed as a genius. Gimme a break!
Where does Krugman say real estate is at a bottom? T2 partners recently released a report of the next waves of mortgage meltdowns coming to a neighborhood near you: 1) Prime Loans 2)Jumbo Prime. Hmmm, I wonder which ‘hoods this affects most? In any case, until the price vs income ratio comes in line with the history of this city then its all delusion. Even the boys at GS say we need to party likes its 1999
I didn’t know that you also won a Nobel Prize, sam. 🙂
Joe….the point is that we are seeing more and more differing viewpoints. Not everyone is saying things will worsen and indeed the data is certainly “less worse” that’s why the stock market, THE BEST LEADING INDICATOR, has rallied so much.