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]
“…few homeowners consider exiting the housing market for purely speculative reasons…many owners don’t have a speculator’s sense of urgency…they don’t like shifting from being owners to renters, a process entailing lifestyle changes that can take years to effect.”
If I fell for all the garbage (renting is throwing $ in the fireplace, etc.) that David Learah, NY Times RE, REBNY, et al, puts out there and bought out of fear that I’d be priced out and that RE only goes up (greed), I’d think the same way. But if homeowners knew the truth about this market, they would have been speculative and tried to take profits (that’s what’s slowly happening now since the music has stopped, capitulation). Now it’s too late for most. Most homeowners follow the herd by definition whether selling or buying. The ones who are fortunate enough to keep their homes will still be kicking themselves for not cashing out the paper value they had (once-in-a-lifetime-cycle).
***Bid half off peak comps***
Dibs is a financial professional and very knowledgable. I always take his opinions very seriously. He also has his cranky side though, and he doesn’t suffer fools gladly as the saying goes.
true that, ralph. it also doesn’t include condos. the only argument you can make for it is that as long as people can move from one to the other without changing jobs, they are “substitute goods” and ought to respond to the economy in similar fashion — but that’s got some obvious weaknesses. curious to know how trulia compiles its data.
Schiller is smart guy and usually is pretty astute about the real estate market. But you also need to realize that his numbers for New York have almost nothing to do with New York City, let alone Brooklyn. Here’s the list of cities that make up the New York metro area index numbers:
Fairfield CT, New Haven CT, Bergen NJ,
Essex NJ, Hudson NJ, Hunterdon NJ,
Mercer NJ, Middlesex NJ, Monmouth NJ,
Morris NJ, Ocean NJ, Passaic NJ, Somerset
NJ, Sussex NJ, Union NJ, Warren NJ,
Bronx NY, Dutchess NY, Kings NY,
Nassau NY, New York NY, Orange NY,
Putnam NY, Queens NY, Richmond NY,
Rockland NY, Suffolk NY, Westchester
NY, Pike PA
I’m not sure the price of a house in New Haven tells me much about condos on downtown Brooklyn.
joe…he doesn’t really harass me. I just find it incredible that there can be such a worthless, ignorant individual out there. Rather amusing were it not so sad actually.
dibs, enlighten us as to what you “add” besides delusional cheerleading?
sorry dibs, bodega will be one of the homeless people living in the ORO for free. his entire monthly expense will be his internet connection, which he’ll use to harrass you every day on brownstoner.
It really was an enormous uptick in nine years. It would not be unreasonable to see a good chunk of that climb diappear, I mean, where will the money come from today?
Securities of all kinds are in the gutter. Municipalities are going bust. GM is now in covernemnt hands. I see no reason for optimism at the moment. I wish I felt otherwise.
holy cow dibs. 3.75X increase in 7 years? is that good data?