Tags: Shiller | housing | bubble | slowdown

Shiller Worried About Housing Bubble

By Dan Weil   |   Tuesday, 24 Sep 2013 01:58 PM

Robert Shiller is worried that the housing market may be entering a bubble, but he also says that it may be headed for a slowdown instead.

"It's a mixed picture," the Yale economist told CNBC. "I don't know where home prices are going to go. This might be the beginning of a slowdown, [or] it could be the beginning of a bubble. But I don't know."

As evidence of a bubble, the S&P/Case-Shiller index soared 12.4 percent in the year through July, a seven-year high.

Editor’s Note:
Obama Donor Banned This Message (Shocking)

The bubble signs are coming in cities that also had bubbles in the recent past, including Phoenix, Las Vegas and cities in California, Shiller explained. "It's regional somewhat. The Northeast is relatively mild."

As for slowdown signs, "the thing that's driving this [housing rally] doesn't seem to be real excitement about a new era," Shiller said. "That's what we saw eight years ago. But now it's more a rebound. Interest rates are still maybe lower than they'll be in the year. It's that kind of thing."

His forecasting models indicate that mortgage rates don't play a big role in home price moves. Instead, what really matters is recent price changes and employment trends, Shiller argued.

So the recent deceleration of price increases and tepid employment gains don't bode well for home prices, he maintained.

Others too say the housing market may lose momentum in coming months. Price gains "will start to slow down to a fairly sustainable pace," Brian Jones, a senior economist at Societe Generale in New York, told Bloomberg.

"The increase in mortgage rates will slow things down a bit at the margin. As the economy does better, people will be in a better position to weather the higher rates."

Editor’s Note: Obama Donor Banned This Message (Shocking)

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