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Yale's Shiller: Rate Hike Shouldn't Be Factor for Home Buyers

Yale's Shiller: Rate Hike Shouldn't Be Factor for Home Buyers
Yale University Economics Professor and Nobel Laureate Robert Shiller

By    |   Thursday, 17 December 2015 10:49 AM


Yale University Economics Professor and Nobel Laureate Robert Shiller cautions Americans that the Federal Reserve’s rate hike shouldn’t really be a crucial factor for home buyers.

But how Americans perceive a policy change by the Fed is almost more important than an interest rate increase itself.

“I think the psychological impact is far more important and could be positive if people think ‘Well, at last we’re coming out of the new normal,’ maybe some people will think that, especially if the interest rates increases continue,” he recently told Fox Business Network.

Shiller, co-creator of the S&P/Case-Shiller Housing Price Index, told home buyers to remain calm and rational and use common sense.

“Well, I tell them that investing in a house is a big decision, you know, talking to the average home buyers, that shouldn’t be too contingent on goings on in the Fed, there’s a likely trajectory of higher rates, and so you might consider that but it’s not a major, we can’t be certain enough about any changes in mortgage rates to make that a big issue right now.”

Housing starts and permits, signs of future demand, rose 10 percent in November. Even so, Shiller remains cautious on housing, Fox Business Network explained.

“The housing activity has been disappointing ever since the financial crisis, it’s up to, residential investment is like 3.5% of GDP, it hasn’t taken off and in the same sense home prices are not up, not in real terms, to the levels they were in say 2006, back then we had 6% residential investment, way higher.”

Meanwhile, Peter Schiff, CEO of Euro Pacific Capital, warns investors not to believe the hype that the Federal Reserve’s interest-rate hike reflects confidence in a strengthening economy. No, just the opposite, he told Newsmax TV.

“The next recession is about to begin and there's a good chance that it's already here or it will begin early in 2017,” he told Newsmax TV’s “The Hard Line.”

The Fed on Wednesday lifted its key interest rate by a quarter point to a range of 0.25 to 0.5 percent, up from near zero for the first time since December 2008.

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“The only reason the Fed is raising rates is to try to show that they have confidence in the economy, but the reality is they have no confidence in the economy and they're trying to cover up those fears with this symbolic rate hike. But they're going to have to figure out how to reverse course unfortunately. They're going to be doing QE4 next year, they're not going to be raising rates again,” Schiff said.

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Yale University Economics Professor and Nobel Laureate Robert Shiller cautions Americans that the Federal Reserve's rate hike shouldn't really be a crucial factor for home buyers.
robert shiller, yale, fed, rate hike
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2015-49-17
Thursday, 17 December 2015 10:49 AM
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