Tags: Shiller | home | investor | buying

Yale's Shiller: Slowdown in Home Price Increase May Deter Investor Buying

By    |   Tuesday, 25 March 2014 12:35 PM

The recent deceleration of home price increases may drive investors out of the market, says Nobel laureate economist Robert Shiller.

Investors have been key buyers of homes during the price rally of the last two years.

The S&P/Case-Shiller home price index of 20 cities rose 13.2 percent in the year through January, the lowest increase since August and down from 13.4 percent in December.

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"The market is weakening," Shiller told CNBC. "I worry that it's going to weaken more because I think investors are in the market when they know that there's momentum in home prices more than in stock prices."

Before these investors were enticed by rapidly rising home prices, Shiller said. "Now it may not last, and these investors may be gone."

The need probably does exist to convert owner-occupied homes to rental homes, "because that seems to be a trend," Shiller said.

"But the problem is that it's not typically a great business to do that unless you can get a good price on the house, because it's expensive to convert and to maintain disbursed family homes. So that's putting just a kind of general drag on the market."

To be sure, investors will be when they can get a favorable price, Shiller said.

Many experts anticipate a continued slowdown in home-price gains. "Prices are rising, even though we should see those gains moderating," Scott Brown, chief economist at Raymond James, told Bloomberg.

"You’re still talking about double-digit percentage increases, which aren’t going to be sustainable over the long term."

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The recent deceleration of home price increases may drive investors out of the market, says Nobel laureate economist Robert Shiller. Investors have been key buyers of homes during the price rally of the last two years.
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2014-35-25
Tuesday, 25 March 2014 12:35 PM
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