Tags: Shiller | housing | bubble | homebuyer

Shiller: Evidence Suggests No Housing Bubble Now, But Maybe in Future

By Dan Weil   |   Tuesday, 01 Oct 2013 08:10 AM

The housing market hasn't overheated yet, but it could, says Yale economist Robert Shiller.

He and Karl Case, an emeritus economic professor at Wellesley College, conducted their annual survey of recent homebuyers in May and June in Boston, Milwaukee, Los Angeles and San Francisco.

"The results suggest that though we are not in a bubble now, there are troubling signs that we may be heading toward one," Shiller writes in The New York Times.

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Respondents expect a 5.7 percent increase in home prices in the next year, up 1.7 percentage points from predictions last year.

"What’s more, long-term expectations in the current survey remained relatively modest, at 4.2 percent a year for the next 10 years," Shiller notes.

Still, in looking at all the answers, "I see no signs that homebuyers have learned the lesson . . . that existing home prices have shown virtually no tendency to trend upward in real, inflation-corrected terms over the last century," Shiller explains.

It's as if people believe every housing collapse must be followed by a rebound that takes the market to new highs, he argues.

Some experts think the housing rally of the past 18 months or so will continue but at a slower pace.

"The jump in mortgage costs is a significant factor in home purchase decisions, so the housing recovery will abate to some degree,” Russell Price, a senior economist at Ameriprise Financial, tells Bloomberg.

But, "inventories are still tight. There is still room on the supply side for builders to continue building more homes.”

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