Yale professor Robert Shiller says the recent upturn in housing prices doesn’t signal that everything is now hunky dory for the home market.
In fact, it’s just typical price volatility in an uncertain market, says the guru who called the massive housing crash years early.
“The sudden rise in home prices suggests that the psychology of the market has shifted substantially,” Shiller wrote in The New York Times.
“But what should we expect in the months ahead? Not necessarily that we’re entering a new housing boom.”
The good news is that the S&P/Case-Shiller home price index for 10 major cities rose 3.6 percent between April and July.
“While that is not a whopping increase, it followed a decline of 4.8 percent in the previous period, between January and April,” Shiller writes.
“The sudden turn could signal a new housing boom, but is more likely just a sign of a period of higher short-run price volatility.”
Shiller says potential home buyers are trying to figure out when to pull the trigger.
“Many people are still playing a leverage game, watching various economic indicators as well as the state of federal bailout programs — including the $8,000 first-time home-buyer tax credit that is currently scheduled to expire before Dec. 1 — in an effort to time their home-buying decisions.”
Meanwhile, in the high-end, a tectonic shift is taking place: The rich are taking over from the poor in terms of foreclosures.
About 30 percent of June foreclosures came from homes in the top third of local housing values, up from 16 percent in 2006, when the foreclosure crisis began, according to real estate research service Zillow.com.
The bottom third of housing markets now make up 35 percent of foreclosures, down from 55 percent three years ago, The Wall Street Journal reports.
The Zillow report shows that foreclosures began to increase in late spring after dropping earlier in the year. And mansions are starting to get hit worse than shacks.
Even the wealthy aren’t so eager to keep making mortgage payments when the value of their homes falls below the value of their mortgage loans.
"The slope of that curve in recent months is much sharper than it was recently," Stan Humphries, chief economist for Zillow, told the newspaper.
Bank analyst Meredith Whitney, whose fame for having also called the crash led to her forming her own consulting operation, now says home prices have another leg to drop, perhaps 25 percent.
“No bank underwrote a loan with 10 percent unemployment on the horizon,” she told CNBC.
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