The recent rally in home prices will probably fade thanks to the sluggish economy, says Yale economist Robert Shiller.
U.S. home prices slipped in November and were softer than expected in the latest sign that a rebound in the U.S. housing market is tenuous, according to Standard & Poor's/Case-Shiller Index.
The S&P/Case Shiller Index, co-created by Shiller, posted a 5.3 percent annual drop for November when it was released earlier this week.
“We saw the biggest upturn ever in our indices starting in April,” Shiller told CNBC.
“They were charging ahead at a 12 percent annual rate or more. Then it started to flag again. This is a puzzling market: it’s not behaving the way it has in the past. The uncertainty is maximal right now.”
Some experts are bullish, Shiller notes.
“If that spirit comes back we could see a strong market even in this weak economy.”
But that’s not what he expects.
“I think it’s more likely that it’s going to go down – better than a 50-50 chance that we’re going to see declines.”
Shiller is bearish on commercial real estate too.
“Commercial has been going down quite dramatically,” he explains.
“There’s the same self-reinforcing thing. They can’t get refinancing on their loans, because everyone knows their property is going down. That’s a downward spiral.”
So Shiller says he’s just as worried about commercial real estate as he is about the residential side.
Mark Zandi, chief economist at Moody's Economy.com, shares Shiller’s concern about home prices.
Foreclosures are “a very serious threat to the housing market, and still one of the most significant risks to the broader recovery," he told Associated Press.
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