Tags: Shiller | housing | recovery | Fed

Shiller: Housing Market Recovery Unlikely to Last

By    |   Friday, 03 May 2013 08:20 AM

The housing market's rebound of the past year is probably unsustainable, says Yale economist Robert Shiller.

Asked by Yahoo whether we've entered a durable housing recovery or yet another bubble, Shiller answered, "My guess is the latter is closer."

"We're in such an abnormal economy," thanks to the Federal Reserve's massive easing program, he said. The average rate for a 30-year fixed rate mortgage hit a record low of 3.4 percent last week.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

"The Fed will stop quantitative easing someday. … They won't keep [mortgage rates] that low forever," Shiller explained.

"Right now there's a lot of excitement in the housing market. But I think it might just be short term." In 10 years, home prices will likely be "about where they are now" after accounting for inflation, Shiller predicted.

So when will the Fed end the third round of quantitative easing (QE3)?

The Fed has said it will keep the Fed Funds rate low until unemployment hits 6.5 percent.

"But as far as QE3, I don't think there's a clear termination indicator," Shiller noted. "It has something to do with the economy coming back. I don't know if it has to come back roaring. I think the Fed is a little uncomfortable with the rapid increase in their balance sheet."

So it's possible QE3 will end this year or next, Shiller said.

In its policy statement Wednesday, the Fed says it stands ready to decrease or increase its bond purchases as necessary.

"The whole debate had centered on when to taper off. Given some of the latest data, the Fed could be more aggressive in its policy," John Silvia, chief economist at Wells Fargo Securities, told Bloomberg.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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The housing market's rebound of the past year is probably unsustainable, says Yale economist Robert Shiller.
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2013-20-03
Friday, 03 May 2013 08:20 AM
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